Real wages are rising and inflation may be levelling off, but many Brits are still struggling to pay for their lifestyle without resorting to debt, new research by NerdWallet UK has found.
With stagnation in the UK economy, consumers may find it difficult to live comfortably within their means.
Surprisingly, the study reveals that those earning a higher salary don’t necessarily feel more financially secure. The data suggests higher earners may be at greatest risk of falling into larger debt because they feel under the most pressure to spend more than they earn.
Key findings:
- Almost a third (32%) of UK adults experience pressure to spend more than they can comfortably afford.
- 30% of UK adults are using credit cards to fund their lifestyle, at least some of the time.
- 25-34-year-olds are the most likely age group to find themselves in debt, with 44% using credit cards, overdrafts or personal loans at least sometimes, to pay for their lifestyle.
- 25-34-year-olds are also the most likely to feel “worried”, “scared”, “hopeless” and “confused” about their debt.
Read on to discover more about the nation’s spending habits, and get our tips on how to stay in control.
Where are we spending the most?
We asked 2000 UK adults which spending categories are most important to them. The data reveals that for 52% of UK adults, essential outgoings like rent or mortgage payments are ‘very important’ or ‘somewhat important’. While fuel is ‘very important’ or ‘somewhat important’ to 46% of consumers. However, both of these categories were surpassed by broadband internet which is ‘very important’ or ‘somewhat important’ to 86% of UK adults surveyed, suggesting that with a rise in hybrid and home working, broadband is one of the most essential things that UK adults spend their money on.
After essential costs, self-care is an important spending category for many UK adults. Almost a third of Brits (30%) consider wellness activities, such as gym memberships, somewhat or very important. Even more UK adults prioritise spending on hair and beauty appointments, with 43% citing these as very or somewhat important to them.
Spending on non-essential treats such as takeaways, meals out and alcohol is a lower priority to UK adults, but remains important to many of those surveyed: 21% prioritise takeaways, 28% meals out and 27% alcohol.
Factors that made it more likely someone will take on debt to fund their lifestyle
Age
Adults between the ages of 25 and 44 are the most likely to fund their lifestyle using credit cards, overdrafts or personal loans, compared with other age groups. 9.6% of those aged 25-44 said they fund their lifestyle using debt ‘very often’, compared with an average of 4% across all age groups.
Gender
Men are more likely than women to experience pressure to spend beyond their means, either from their partner, family, friends or other places such as social media. 36% of men said that they feel pressure to exceed their own comfortable spending limits, compared with 29% of women.
Men are also more willing to take on debt to pay for their lifestyle, with 64% of men saying they find themselves in this situation ‘sometimes’, ‘somewhat often’ or ‘very often’, compared with 47% of women.
City living
40% of Londoners sometimes, often or very often go into debt to pay for their lifestyle, compared to 19% of the general population.
Living in London makes it three times more likely that someone will take out a personal loan to pay for their lifestyle: 39% of Londoners said they’ve done this, compared with the national average of 13%.
Higher incomes don’t mean fewer debt worries
Higher interest rates, high energy prices and high inflation have put financial pressure on many households, and bringing home a bigger salary does not necessarily protect consumers from the cost-of-living crisis. Debt worries, it seems, are universal.
NerdWallet’s survey has found that those in higher income brackets use more debt than those in lower income brackets. A factor in this could be that having a higher income gives you access to more debt, with the possibility to borrow more.
Those earning above the median salary – £34,963 in the UK – may be more likely to use debt to fund their lifestyle, with close to a quarter (23%) of those earning £40,000 per year or more saying they find themselves in debt ‘sometimes’, ‘somewhat often’ or ‘very often’.
A quarter of those earning £60,000 or more say they fund their lifestyle using credit cards ‘very often’ or ‘somewhat often. This is compared to 21% of those earning between £40,000 and £60,000 and only 13% of those earning between £20,000 and £40,000.
UK adults earning below £40,000 are less likely to find themselves in debt to pay for their lifestyle compared with higher earners. A total of 80% of those earning £20,000 or less per year, and 81% in the £20,0000-40,0000 income bracket say they ‘rarely’ or ‘never’ fund their lifestyle through debt.
Not all out of control
Despite the widespread financial pressures of recent years, 56% of the UK adults surveyed are not in any unsecured debt.
When it comes to unsecured debt (personal loans, overdrafts, utility bills, credit cards and payday loans), those over the age of 65 are the most likely to be debt-free. 77% of this age group report no unsecured debt, followed by 55-64 year olds, of whom 65% are free from unsecured debt.
Tips from Amy Knight, NerdWallet UK Spokesperson, on how to keep your spending on track
“There is a perception that budgeting can be difficult and boring, but it’s possible to turn making a budget into a fun personal project. It’s also much easier now to track your spending on the go by taking advantage of the many budgeting apps you can download to your phone.
“Start by using the 50:30:20 rule and then adjust it according to your personal circumstances and your individual financial goals. If you have a partner, you might benefit from working on a joint budget together, especially if you share essential household outgoings.
“Getting to know your own spending behaviours can help you set limits that will support you towards your financial goals. For example, if you know that scrolling through Instagram late at night leads you to make impulse purchases, adjust your phone’s settings so that social media and shopping apps aren’t accessible after a certain time in the evening.
“While you’ll be able to override this measure by entering your passcode, the extra few seconds it takes to get into the app could be enough to make you reconsider whether you really want to spend that money. Alternatively, some bank accounts let you block specific websites to prevent accidental splurges.”
Methodology
This survey was conducted online within the United Kingdom by OnePoll on behalf of NerdWallet UK in February 2024. 2,000 U.K. adults ages 18 and older Were asked to respond to a series of questions about their attitudes and behaviour regarding saving.
For complete survey methodology, including weighting variables and subgroup sample sizes, please contact: [email protected].
Image source: Getty Images
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