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The True Cost Of Inflation Is Causing Brits To Struggle
Rising living costs are increasingly burning a hole in consumers’ pockets and purses, it has been suggested.
In research carried out by the Motley Fool as part of its bi-annual inflation study it was revealed that increases in the cost of living for “real people” are surging at an annual rate of eight per cent. Such a figure, the firm pointed out, is significantly behind data released by the Office for National Statistics which reported that the consumer price index (CPI) is currently at three per cent. This actually means a rise from the 2.5 per cent recorded in April. It was stated that the drive in the CPI - which the government uses to adjust wages - was due to increases in energy costs such as gas, electricity and heating oil.
Because of the variation in the CPI and the Fool’s inflation index, it was predicted thatthe actual houshold income will probably tail behind the real rising cost of living|reported that household incomes will continue to lag behind the rising cost of living[/spin]. At present it was stated that the average consumer is putting one pound out of every 50 away for use in later life. And unless action is taken to counteract this, the personal finance publication reported that in addition to having less disposable money, many people will have to borrow or withdraw cash from savings accounts in an attempt to make ends meet.Furthermore, the Motley Fool predicted that within four years the typical British household may be facing a shortfall of 8,000 pounds in their annual family budget.
In facing dramatic increases in the cost of living, it may be possible that consumers find their capacity to manage the varying demands on their spending is coming under more pressure. This may have an impact upon their capacity to make repayments on mortgages and personal loans, service store and credit card debts, transport expenses and meeting the cost of utility bills.
Commenting on the figures, David Kuo, head of personal finance for the Motley Fool, stated: “The erosion of the amount of money we save each year strongly suggests the true rate of inflation is gradually crippling household budgets. The gap between what we earn and what we spend means we have less money to put away. But as the hole turns into a chasm, we are required to patch up the deficit with money previously salted away. However, a point is reached when the gulf can’t be bridged.”
The Fool went on to say that people need to ensure that they monitor houshold expenditure in order to ensure that they do not succumb to the government’s “inflation trap”. Mr Kuo added: “Just because someone calls the tail on a dog a leg, it doesn’t make it a leg. Pause and think - a dog still only has four legs and a tail.”
For consumers worried about their ability to manage their finances over the remainder of this year in the face of rising living costs, applying for a loan might be advisable. However, those who have difficulties with debts in the past but are confident about their current capacity to make repayments may find that a bad credit loan could be of assistance. By selecting such a loan it may be possible that borrowers can manage tax costs, credit cards and other demands. This could be particular help after Unbiased’s recent Tax Action report revealed that a record 9.3 billion pounds in unnecessary tax payments will be made in 2008.
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