How we spend money has been a topic of interest not just to banks, but economists and psychologists too.
The way we spend has been categorised many times. By age, by personality, by gender and even by location.
Research done over 5 years by the OBR, Office of Budget Responsibility, between 2012 and 2017 showed that Britain is a nation of spenders.
In 2017 the data showed the UK is second only to Canada as the most indebted G8 nation. During that period household debt rose by 7% reaching in excess of £1.6 trillion. The average UK household debt (including mortgages) was £58,540 in June. People owed nearly £1.6 trillion at the end of June 2018, up from £1.55 trillion a year ago.
Borrowing has risen 19% in the same period.
Over the same period consumer credit, a combination of credit cards, store cards, loans, and overdrafts, increased by 19% too. The OBR anticipate that this will account for 47% of household income by 2021.
One personal pension and investment specialist company also found in their report during the third quarter of last year that 33% of UK consumers worry about their finances at least once a day, while more than half (54%) do so once a week. On average, we worry about money three times per week.
More women worry about money than men. Almost 40% of women have these financial woes on a daily basis, compared to just 26% of men.
What we do and how we are employed can also play a part in how often we worry about money. Interestingly, the employment band that worries most about their finances is actually those in full-time employment with an additional income from a side-line activity, 45%. Perhaps this group has had to take on an additional job to pay of their debt, explaining their higher level of financial anxiety.
The frequency of daily financial worries within this employment type is higher than all others, compared to 36% of part-time workers, 34% of self-employed people and 31% of single job full-time employees.
Those that worry the most about money.
The differences in how our families are made up, in other words, the different types of family units, also impacts the frequency of money worries. Those who make up the biggest group, not unsurprisingly, are single parents with children under the age of 18. 41% of these families say that worry about their finances on a daily basis. This is much higher than couples who do not have children, 28%. Couples with grown up children living at home 27%. In the group of single adults with no children the figure was 35%.
Those that worry the least about money.
The group most comfortable with their current financial position and that worries least are the over 55s. Almost a quarter,22.5%, said they never worry about money. This is in stark contrast to the 5.5% of 18-24 year olds who said the same.
This is probably because of the stage of life they are at. 18-24 year olds could be starting out in their careers or saving for a property. The over 55s are reaching or have reached retirement age and are usually more financially settled.
However, despite the frequency of our money worries, respondents to the survey still took out an average of £1,110 of debt in Q3 2017.
Despite the warnings from the Bank of England of a “spiral of complacency” in terms of consumer debt, it seems that Brits are continuing to take out new debt, regardless of their pre-existing money worries.
The report shows that 90% of UK consumers lie about their finances to hide the scale of their debt, while 86% have openly lied about their debt to their parents, friends, partners and colleagues. This shows a reluctance for facing up to the realities of debt says the report.
How we manage money now could impact our future stability.
Our future financial stability is impacted by how we think about money now. Preparing for pensions and retirement for instance. Something we are constantly being reminded of, but statistics show many of us are not thinking ahead.
According to the report, 45% of people saved nothing towards their pension in Q3 2017. Interestingly, this was most common in the 45 to 54-year-old age category, with 47% adding nothing to their retirement funds. 18 to 24 year olds followed closely behind with 44%.
The number of non-pension savers has significantly increased in the second half of 2017. Earlier figures show the figure was only 32% in previous quarters of 2017 Experts believe this could be because of Britain’s growing problem with debt. For whatever reason, households are not contributing as much as they were towards their pension pots.
“Brits are most likely to spend with their hearts rather than their heads.”
The way we spend our money has also been the subject of a survey by one of the world’s biggest banks, HSBC.
They say we are most likely to spend with our hearts rather than our heads.
The survey conducted with 9000 consumers identified 8 “attitudinal segments” It says each group possesses unique attitudes and personality characteristics which inform the choices we make when it comes to money.
All the groups were given different names to reflect how they approached spending.
The 8 different “characteristics” groups identified by the survey.
The first is the Trend spender which accounted for (16 per cent)
Trend spenders are ruled by their heart so stretching their finances does not scare them as long as they can maintain their lifestyle.
“Trend spenders” emerged as the most prominent. They are ruled by their heart when it comes to money, [And] don’t feel worried about loosening the purse strings as long as they can maintain their lifestyle.
More people found themselves in this category than in “sensible sage” or “skilled savers,” which describe those who are more prudent when it comes to their spending.
The sensible sage (15 per cent)
“Save now to spend later” is their motto. They see no point in getting into debt unless they can pay it off in full every month. Bargains matter, as does finding the best deal.
The driven achiever (15 per cent)
Driven achievers know what they are doing when it comes to managing their money. They spend time doing their research, allowing them to make savvy decisions and are comfortable pushing their financial boundaries if they think there’s going to be a pay-off.
The self-sufficient spender (14 per cent)
Self-sufficient spenders are confident multi-taskers. They are independent and like to make things as easy as possible, so they are keen online shoppers. Investing in quality matters to them. They are in total control when it comes to finances. Saving is important to them and they are cautious when it comes to taking on any financial risk. The personal touch is important to them, so they prefer to conduct their financial affairs face to face.
The Skilled saver (10 per cent)
Skilled savers keep a tight rein on their finances and their strict budgeting skills mean they do not spend too much. A resourceful nature means that nothing goes to waste when they are around. Careful saving habits make them averse to taking on credit cards or loans so they always live within their means.
The Spontaneous spender (9 per cent)
They are always trying new things and have new ideas. Spontaneity is very important to them. If it is a choice of staying in to save money or to spend money going out to the latest restaurant, they will choose the latter.
The Budget guru (7 per cent)
They have good financial discipline, as they balance the books to come in on budget. They are not ones to splash out but make careful financial decisions.
Brits don’t like to talk about money.
A spokesperson for HSBC who carried out the research said, “Britons are notoriously reluctant to talk about money and this can impact our financial behaviour.”
“Forty-five per cent only check their main bank account once a week or less and one in 10 only check it once a month.”
“We want to encourage Great Britain to start thinking about how their financial personality could affect how they manage their money, which is why we’ve released the Bank-Life Balance test.”
The survey also found London is home to a higher number of “driven achievers” than the national average.
Meanwhile, millennials are most likely to be “sensible sages” – people who see no point in getting into debt unless they can pay it off in full every month.
Mounting consumer debt will impact our financial outlook.
But the financial outlook is changing. Many households are now finding they have little choice in the way they spend. They are increasingly having to borrow more to make ends meet. Paying essential bills and putting food on the table is a more ‘real’ scenario for many families. For these households, it is less about personality and more about reality.
This could free up more available income to put towards saving for a better pension. Clearly something that will have a huge impact on how comfortable we are in later life.
Getting good advice and help with your debts “increasingly important”
Ramsey Lomax has helped people in debt since 2007. Because we care. We are dedicated to helping people, throughout the UK, to find a lasting solution to their debt. We work for you, not the banks, lenders or Government. Our mission is your debt freedom.
Ramsey Lomax are authorised and regulated by the Financial Conduct Authority (FCA) and licensed by the Information Commissioners Office (ICO)