Infographic: Where Does Your Pay Cheque Go?
Today I have an eye-opening infographic for you. Do you ever wonder how you compare with the average Briton when it comes to spending your pay cheque? Are you content with your rainy-day fund or do you worry you haven’t got as much squirreled away as your friends or colleagues?
Worryingly, it appears most Brits are spending more than they bring in each month. Moreover, there is a steady shift from cash and cheques toward plastic and electronic payment methods.
According to the Office for National Statistics, British households have spent more than they received for an unprecedented nine consecutive quarters, amid a longer squeeze on real incomes. What’s more, households across the country have been net borrowers in every quarter between October 2016 – when living costs started to rise after the Brexit vote – and December 2018.
Check out the full infographic by Peachy below which neatly reviews the key household spending statistics in the UK:
Personally, I find the saving stats at the end of the infographic especially worrying. Large numbers of people say they have no savings whatsoever (and even £100 is a tiny amount really).
Living from one payday to the next is a precarious existence, though as the graphic indicates many UK citizens do exactly this. Nonetheless, it makes you very vulnerable when a sudden change of circumstances occurs that reduces your income or increases your expenditure.
An example from my own experience is when, almost five years ago, I was diagnosed with prostate cancer. My treatment involved two months of radiotherapy, requiring daily trips of 30 miles each way to the Royal Stoke University Hospital in Stoke-on-Trent. It was simply impossible for me to go on working during this time, so (as I was self-employed) my income took a big hit. Fortunately I had enough in the bank to cover my lost earnings during this time. If I hadn’t, it would have added to the already considerable stress I was under. (And yes, I’m doing fine now, thank you.)
i think it’s particularly important for older people to have some savings set aside. Not only are health problems more likely as you get older, your long-term earning potential reduces. Nobody should be entering later life with nothing in the bank to tide them over if – or more likely when – the need arises.
So I strongly believe everyone, whatever their age, should do their utmost to build a savings pot. Of course, for people on modest incomes that’s not always easy. So I recommend a two-pronged approach of reducing your outgoings and boosting your income (e.g. by starting a side hustle).
Saving money and making money are, of course, subjects I cover regularly on Pounds and Sense. By doing these things, you should hopefully build up a pot that will stand you in good stead when life hands you those inevitable lemons.
I guess another reason people aren’t saving as much – or at all – these days is the very low interest rates on offer from banks and other savings institutions. In itself that isn’t a good enough reason for not having a savings pot, but of course it does mean it’s extra important to look around for the best deal you can find.
In addition, once you have enough cash savings to tide you over for a few months, it’s good to think about investing some of your extra money for potentially higher long-term returns. Again, investing is a subject I cover regularly on Pounds and Sense. I won’t go into detail about this now, except to say that a good starting point is a tax-efficient Stocks and Shares ISA (I like Nutmeg’s automatically diversified robo-adviser platform myself). And you should put as much money as you can into your pension, of course.
As always, if you have any comments or questions about this post, please do leave them below.