Image by Kirsten Loza, Netherlands
Former prime minister John Major's famous claim that If it's not hurting, it's not working will be cold comfort to middle and lower income families, who have learned this week that, for them, the recession is far from over.
According to figures released by the Institute of Fiscal Studies, the average middle income British family is likely to be nearly £1,800 a year worse off by 2015, the result of a triple whammy of low or no pay rises, higher taxes and austerity benefit cuts. Families with two kids will lose £34 a week, or £1,768 a year, while childless couples will see their weekly income drop £24 a week.
But the real pain is reserved for those earning less than £12,000, who will see their spending power fall by 4.5 per cent between the financial years ending in 2012 and 2016.
That means it's arguably more important than ever to know where all your money is going, and to stay creditworthy if you want to maintain your standard of living and avoid sliding into debt.
Get your finances in shape now
Enter your bank accounts and credit cards into Money Dashboard home finance software to find out where your money goes you may see some easy ways to cut back straight away, such as magazine or club subscriptions that can be cancelled.
Check what's on your credit report
Your credit report is an overview of your borrowing behaviour - a personal history of the credit you've had and the repayments you've made, from mobile phone accounts to mortgages and more, and lenders use it to help decide if you'll be able to make new repayments on time. You can see your Experian credit report with a 30-day trial of CreditExpert.
Trial available to new members only. Monthly fee applies after 30-day trial ends. Trial period starts on registration further ID verification may be required to access full service, which may take up to five days.
Some tips to help you avoid the squeeze:
- Spend a little time once a week budgeting your spending for the week, and try to stick to that budget
- Pay off the debts charging most interest first
- Never miss a repayment this will stay on your credit report for at least six years, potentially affecting your credit score and preventing you from getting the best deals
- Use some credit on a regular basis, but never take on more than you can afford.
- Stay within the agreed credit limits and always make your repayments on time, paying more than the minimum off your credit cards each month if you can.
- Space out your credit applications and avoid making several applications close together
- Make sure you register to vote at your current address
- Contact the lender if you find yourself struggling you may be able to negotiate a more affordable schedule of repayments or take a short repayment holiday
- Make sure your credit report is accurate and up to date single minor errors can cost you valuable points on your credit score and mean you pay higher interest charges