The low levels of disposable income for when Covid restrictions end have been highlighted by AA Financial Services research.
The research found took a look at the health of the nation’s finances to see where people’s money goes each month and found that 88% of people’s paychecks are fully committed, leaving only 12% of their take-home pay free for discretionary spend and treat.
The biggest monthly commitments related to the cost of running a home – specifically rent/mortgage payments (20%), direct debits (18%) and food (18%). Car costs and payments account for just under a tenth of an adult’s take-home pay (9%)
Nationally, the average British adult commits almost a fifth (19%) of their salary into financial products each month, almost twice as much as they have available for discretionary spend (12%). Key financial priorities included: putting money into savings (10% of salary), servicing or reducing debts (5% of salary) and making contributions into investment funds or pensions (4%).
Regionally, London lived up to its reputation as one of the most expensive places in the country to live. Here rent and mortgage payments accounted for a substantial 27% of the monthly paycheck – and was three times greater than the proportion of the paycheck that was leftover as disposable income (9%).
James Fairclough, Director of AA Financial Services said “The Prime Minister has given us hope that Covid restrictions may end in June but, as we re-emerge from lockdown, attention will turn to kick-start the wheels of the economy – and this will focus the spotlight on the financial health of UK households.”
“Our study suggests many households have little disposable income to play with once-monthly commitments have been serviced and whilst young people are saving money each month, many will be disproportionately hit hard by housing and rent costs that account for the biggest chunk of their monthly pay packet.”
“Now is a time for people around the country to put their finances through a spring clean, to look at the household direct debits that can reduced, the savings they can make on shopping around for better insurance and car finance deals and the options available for consolidating debts and freeing up cash.”