Personal finance

7 trend takeaways you need to know about personal finance

Posted on 9th May 2014

Each day in your life, when you make financial decisions, you are taking part in the soaring personal finance trends that shape your daily life. In this report, you are going to learn how Brits are responding to personal finance trends in a bid to take control of their financial lives.

Household spending

One of the first areas that you can see how people are spending in the UK is through household spending. Naturally, households can include children or there could be extended family members living in the house that creates a specific financial need. The Office of National Statistics (ONS) which is the government’s arm for stats in the country announced that the average UK household was spending around £489 per week. This averages to around £1,956 per month.

The ONS also found that households in the UK are spending less and less when you take inflation into account. This highlights the financial pressure that the crash caused and how it changed people’s needs and wants. Even if a household wants to spend money, the austerity period meant that more people are tightening their belts.

The ONS also found that housing followed by fuel were the two largest monthly expenses that the average British household had to pay. Since many Britons have mortgages and rents are high in cities like London, it’s no surprise that housing was the number one expenditure that people need to pay per month.

Spending categories for households

Transport

Unsurprisingly, transport turned out to be another high expense for UK households. Of those surveyed by the ONS, the average spending on transport per week was £64.10. Those who drive said that they spend around £16 on petrol and £8 on diesel. The spending on petrol and diesel is a huge chunk out of the total.

When you are considering transport, always look for unique ways to cut down costs. If you don’t need to drive, consider selling your car or only using it on the weekend. If you can cycle to work or walk to your job, these are things that you should consider in order to keep the costs of transport down.

Trend takeaway #1: As people’s finances get squeezed, there will be more changes in how people transport themselves from A to B with more choices instead of just driving or taking the train. People want their money to go further with transport around the UK.

Food

Food is one of the most important areas of household spending. From drinks like water to breakfast cereals, it is clear that all households need to spend adequately on food in order to live well. The survey found that £56.80 was spent per week on food. This is for a household not a single person, which proves how incredibly difficult it is for families across the UK to budget properly for food so that everyone can eat three square meals per day.

Trend takeaway #2: Food spending is important and must be given more priority in UK households compared to other categories. While food expenses are seen as something that can be slightly cut, it still remains a top priority on the list.

Recreation

The ONS’ survey found that £61.50 was the average weekly spend for recreation and culture. This included spending on TV, books and activities. Recreation is clearly still an important part of British culture so households are finding ways to integrate this into their budgets.

Trend takeaway #3: Recreation and switching off from the stresses of daily life are still supported by many Britons. If taking a break and relaxing is still important to you, there are cheap ways of having fun without breaking the bank.

Holidays

We all know that as Brits, we love our holidays. Whether we are camping in the Cotswolds or on a beach in Corfu, it’s clear that holidays are part of our DNA. They are also part of our spending according to the Office of National Statistics. Around £16 per week was spent on package holidays abroad while only £1.50 per week was spent on holidays within the UK.

Trend takeaway #4: Going abroad still dwarfs British holidays in general. Brits want it to feel special which is why package holidays tend to be chosen over other options. Holiday spending has remained constant with European destinations being chosen to save money. If you want to go on holiday, consider short-haul destinations in order to keep the costs down.

What does UK household spending really tell us?

With each new day, the story is being written when it comes to UK household spending. The insights from these categories highlight how spending has been tightened but non-necessity categories like recreation still have money being spent on them. The holiday category also illuminates that despite austerity, Brits are not going to give up on creature comforts because life has to feel like it has some spark to it.

Car Spending

We know that we spend good money on our cars. The statistics also prove it as in an article from AOL UK found that almost half of UK drivers said that they would spend their disposable income on cars.

We all know that cars can be expensive with a wide range of things to pay such as road tax, fuel, car washing and maintenance. This is why 10% of UK drivers said that they would be cutting back on car maintenance in order to save more money.

When you are buying a car, you are buying more than just something that takes you from A to B. You are also buying something that costs money.

Always consider your budget and your income before you buy a new car. Rory Carlin, a spokesman from Halfords Autocentre who conducted the research quoted from AOL said: “Car maintenance isn’t just necessary, it is essential, and we have uncovered some shocking admissions that are likely to be a hangover from the recession.”

Trend takeaway #5: Car spending is being minimised by taking the car to be serviced less as opposed to spending less on fuel for example. If you want to save money on your car’s usage, drive it less but keep it well maintained for your safety.

Lending to individuals

In a recent publication from the Bank of England, lending to individuals was said to be positive in the 3 months leading to November 2013. These changes in how individuals are receiving loans and credit are bound to be good news for the industry and for consumers.

The Bank of England looks at secured lending as its benchmark for what lending to individuals is. 2014 statistics from the Bank of England are just as positive. The Bank of England stated in a recent publication that total consumer credit increased in the 3 months to February 2014.

Another shining example of the changes in personal finance this year is mortgage lending.

Mortgages are one of the most important indicators of an individual’s personal finance. In the same report, the Bank of England revealed that gross mortgage lending has increased from the start of the year. Mortgage lending at a monthly rate is now worth around £1bn per month, according to the Bank of England.

Trend takeaway #6: Lending to individuals is undergoing a big change in post-austerity Britain. Lenders and consumer credit companies are ready to help consumers find credit and mortgage lenders in particular are approving more homes for house purchases.

The rise of cards in UK personal finance

Most of us probably have at least a debit card or a credit card. Having a debit card or a credit card means that you are one of the many Britons that is able to get credit or use money how you want.

The power of plastic cannot be understated in the UK. The UK Cards Association, the industry body for the cards industry in Britain, revealed in its annual report that 75% of all UK retail spending was on cards such as debit and credit cards. This is a staggering number for retail spending which is showing that cash has been replaced by cards as more Britons feel safer when using their card.

Debit cards are becoming more popular than credit cards, according to the annual report from the UK Cards Association. This is not a big surprise considering that consumers want to know how much they are spending so that they don’t get into debt.

Another fascinating trend that the UK Cards Association revealed was that the UK accounts for 30% of all EU card spending. If this blows your mind, then read this: more than 70% of credit cards in the EU are held by British consumers, according to the Association. This highlights how cards have been ingrained in UK personal finance culture as a badge to show that you know where your money is.

Trend takeaway #7: Cards have become a way of life for the majority of Britons. From debit cards to credit cards, card spending remains a fixture in personal finance. New trends such as contactless cards are increasing in popularity as Britons embrace razor-sharp technology to manage their money.

Bubbling under trend: mobile payments

While mobile money has been pioneered in countries like Kenya and Tanzania, the UK is trying to catch up.

According to Econsultancy.com, around 57% of British 25-34 year olds have said that they have accessed online banking on their smartphones or tablet devices. These statistics are very encouraging as they show that banking is now superseding just going into your local branch – you are able to carry information about your bank account with you wherever you go.

In a survey from eDigitalResearch cited by Econsultancy.com, around 52% of those who are using contactless mobile payments, which means the payment capabilities are already on their devices, said that they will keep on using them.

The shift to contactless payments on mobiles is something that is exciting for the personal finance industry because it shows how connected personal finance is going to grow as consumers expect more from technology and finance.

BAI Banking Strategies said that payment disruption is one of its top 2014 trends for personal finance. Mobile payments fit nicely into payment disruption because it challenges everything about traditional banking. As more Britons get new smartphones and tablet devices like the iPad, mobile payments will grow in the UK.

Mobile payments is supported by the need for mobile shopping as 69% of tablet owners are said to make a purchase on their tablet device, according to research cited by Econsultancy.com.

financial planning

How will you make these trends work for you?

These electric 7 trends that we have highlighted for you including the rise of mobile payments can energise your personal finance life if you use them properly.

Due to technology and increased competition from new financial services companies, banks and big lenders know that they have to get creative to ensure that you are happy. Whether you want to improve your credit rating or if you want to save more money, you need to make sure that you know how you are spending but also that you understand what is happening in personal finance.

These trends will affect your personal finance situation so understanding them and applying them to your life will improve how you manage your money.

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