What is a recession and how can it affect you?
April 5, 2024
You’re drowning in Excel spreadsheets setting out your monthly budgets, and you follow “expert” advice to the letter, but you still find budgeting an uphill struggle. If this sounds familiar and you are not able to save money or you find that the budget you set is quickly reached and surpassed, it gets to a point where you have to ask yourself “are you really that bad at budgeting?” or is the system against you?
Budgeting is all about control and unfortunately due to the turbulent financial landscape over recent years, control is difficult to come by.
So, are you really that bad at budgeting?
Many people that we speak to are in desperate states with their money. Many are in huge amounts of debt and it is not because they have been buying designer bags or splurging on expensive meals. They are using all their income and more on living day to day. Even though they have been watching every penny, trying to skip meals and spending little to nothing on pleasure activities – they have little choice but to turn to credit.
This has all coincided with the cost of living crisis.
Ultimately you want to budget to keep away from credit and also save a bit each month. We all have sink funds that we want to save for, but many are finding it difficult and feel like those around them are in different positions. We were surprised to read recent research from Moneyfarm showing average savings by age in the UK. You can read the full report here, but many of us were relieved/happy that we had been overestimating the amount that we *should* have in savings by a certain age.
Why can budgeting be so hard?
You have the best intentions to budget and save but the system is set against you.
The cost of living
Essential expenses in the UK have seen an upsurge in prices. This has placed significant strain on household budgets, meaning that less disposable income is available to spend or save. The housing market has become a battleground for affordability, with property prices/rental prices/mortgage rates skyrocketing, leaving many with no choice but to allocate a substantial portion of their income towards housing costs.
Wage stagnation
Despite some reports that people have seen wages rises, these have not been in line with inflation. Wage growth has failed to keep pace and it has left individuals with less disposable income to cover their everyday needs. For many, this has turned into a constant juggling act of prioritising essentials and sacrificing other aspects of their financial wellbeing.
Financial education
This is dire in the UK. Many critics argue that a large proportion of the UK population lack basic financial education, leading to poor budgeting habits. Being given the basic starting skills is one thing, but we also need the skills to be able to identify when we are in trouble with our budgeting, and the skills to find a solution without turning to credit.
Mental health
If you find yourself in an uphill battle with budgeting, it will take a toll on your mental health. Financial stress contributes to anxiety and impacts overall wellbeing. Finding yourself in this situation can mean that you don’t want to make the effort to try and implement effective budgeting strategies.
What else can I do to budget wisely?
- Look at where you are overstretched and over committed. Think about how you could slim things down a bit
- Always see if you can get better deals elsewhere with energy providers, car insurance, contents insurance etc when they come up for renewal
- Try to put habits in place that you can continue – start small. Save a few pounds each month if you can and then increase that when the opportunity arises
- Take time to carry out a money overhaul – you may be able to see where you can make cuts or free up some money for savings
Given the recent debt statistics that have been released, it looks like UK households will still be feeling the squeeze for some time to come. Try to implement some of the tips in this article, however you have to be kind to yourself. Some things are beyond our control. If you do find yourself in a situation where your income does not cover your household budget, then it may be worth speaking to those institutions that you make repayments to.
