Falling savings rates and earnings
The latest reports from the Office for Budget Responsibility (OBR) and the independent Institute for Fiscal Studies (IFS) suggest that households are running out of savings and shouldn’t expect a wage boost to cover spent cash. If they’re right, workers must pay even closer attention to managing their money over the next five years.
IFS director Paul Johnson recently warned that earnings growth looked unpromising, with wages in 2020 expected to be no higher than in 2008. Meanwhile, living standards think tank The Resolution Foundation suggest that earnings growth is on track to reach the lowest levels since the Napoleonic Wars.
Part of the problem is not simply that wages aren’t growing, but that inflation – and therefore the cost of essentials like food and fuel – is rising faster than earnings. So in real terms, workers are losing purchasing power and might not be aware of it.
One of the consequences has been highlighted by the OBR, who last week reported that consumer spending rose at record rates in 2016. As a result, it was suggested that people are running the risk of spending away savings pots at a time when a financial buffer is increasingly important.
At the same time, credit card lending is on the rise so it is vital that consumers keep a check on their outgoings to avoid falling into a debt spiral – particularly in light of recent benefit cuts and the uncertain economic climate.
Much of this news arrives at the same time as Chancellor Philip Hammond’s budget and that marks an excellent point for consumers to take stock of their debt and try to calculate their costs for the year ahead.
The Resolution Foundation has warned of a squeeze on households until 2020, so keeping track of how your financial situation may change will ensure you can plan ahead to manage your savings and pay off debts in a timely manner, with minimal risk.
For more information about Dukes Bailiffs, and advice on maintaining healthy cashflows, contact us today.