Three in ten consumers spend more than they receive in income

Three in ten (28%) consumers ran a ‘deficit budget’ in the past month, spending more during the month than they received in income, according to new research from R3, the insolvency trade body, and ComRes.

One in six consumers (17%) spent up to £100 more than they received in income over the past month; 7% spent between £100 to £300 more; and 3% spent over £300 more.

R3’s research follows statistics from the ONS which show that households have been in a budget deficit for a record nine consecutive quarters (Oct 2016-Dec 2018), while the average UK household spent £900 more than it received in income in 2017.

Nearly a quarter (22%) of respondents to R3’s research said they do not have any savings at all at the moment, showing that levels of financial resilience are low for many people.

Mark Sands, Chair of the Personal Insolvency Committee at R3, said “This is a worrying snapshot of consumer’s personal finances.”

“For some people, a month of deficit won’t be an issue, as it may be a one-off, and they may be able to cover the overhang through using savings, or borrowing. However, for others, these options will be less readily available, leading to potential problems ahead if the deficit persists.

“With our research finding that a large minority of consumers don’t have any level of savings at all at the moment, it’s worth sounding the alarm about people’s ability – or otherwise – to cope with unexpected hits to their finances. Debt issues can suddenly spiral due to changes in circumstances, and overspending each month does not leave any room for saving for a significant proportion of people.”

“For some, a monthly overspend is a more regular occurrence, and this group should seek advice on personal finances as soon as possible: Even a relatively small amount spent over budget in a month can add up to a much larger problem over the course of a year.”

Those aged 25-34 years were likeliest of all age groups to report spending more than they received in monthly income (43%). By contrast, the corresponding figure for those 65+ was only 12%. People’s housing situation also made a difference: A third of renters (35%) said in the past month they spent more than they received in monthly income, compared to a quarter of homeowners (24%). Renters (24%) were more likely than homeowners (14%) to have overspent by up to £100 in the last month. For amounts between £100 to £300 (8% of renters v 6% of homeowners) and over £300 (renters 3% v homeowners 4%), respondents’ housing situation made relatively little difference. Mark Sands added: “Young people’s incomes are generally lower, while the costs they pay for expenses like housing and transport have risen on average, leaving holes in their budgets. It’s no shock either that renters are more likely to have reported spending more than they received in income in the last month than homeowners, and with the number of people renting having grown significantly in the last decade, more people will be experiencing precarious finances.” The research found that 7% of consumers reported that they have borrowed £100 or more from family or friends in the last month. Mark Sands continued “Whether the overspending is funded through using existing savings or through formal or informal loans, it is a sign that all is not well, despite record levels of employment. A single month of a deficit budget isn’t necessarily a cause for panic, but if they’re happening with regularity or increasing in frequency, talking to a qualified and professional debt expert is a must. Taking no action will only see problems snowball.”