Britons grossly underestimate essential monthly bills
British people are grossly underestimating their monthly essential spend by as much as £964, according to a new report.
At the same time they are overestimating how long they could survive on their assets, if they were to lose their monthly income, by five months.
The Reality Gap Report, commissioned by protection specialist, Bright Grey explores people’s perceptions of their monthly outgoings vs. independent research into what people are actually spending and have in personal assets.
The average Brit thinks they spend less than £892 a month on bills, but in reality they fork out nearly £1,378, this is a difference of as much as £734 for child free couples or £964 per month for families.
This reality gap may explain why Brits believe that if they or their partner lost their job they could (on average) last up to 10 months on a single income. The report says that the reality is that the majority of Briton’s could only manage to survive for around five months on the average redundancy payout of £10,000.
Roger Edwards, proposition director at Bright Grey, commented: “From our report, it’s clear that Brits are ill informed when it comes to their finances. Not only are they grossly overestimating how long they could survive if they lost their income stream, but even more worrying is that they have no real concept of what they’re spending each month, making it very difficult to budget and plan effectively.
Four in 10 people (43%) think they could use their savings to cover the bills if they lost their income source. But The Reality Gap Report reveals 38% of the
Nearly three in 10 people (28%) said they would ask creditors for help if they were unable to pay their bills and a further 13% would rely on credit and loans. With 33,600 of credit applications turned down everyday this year, the chances of using extra credit to get by are slimmer than many people would hope for.
Around a fifth (19%) of Britons say they would sell the home if they had to in order to get by, and one in five would remortgage. With a 58% decline in gross mortgage lending since May 2008, and a property repossessed every 10 minutes – homes have become an unreliable source of emergency funding.
A smaller proportion (7%) said they would rely on Government handouts to cover the bills, but with job seekers allowance currently around £60.50 per week for single people over 25 or £94.95 per week if they are in a couple, it’s a far cry from the national average income of £470 per week.
And the 6% that say they would apply for a council property if they couldn’t pay the bills face a long wait, as there are already 1.8m families on the waiting lists, and 200,000 joined the list last year alone.
