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We have to stop spending beyond our means

We have to stop spending beyond our means

10 September 2010 / by Rachel Mason

According to research from Schroder's, in the past year, 31 per cent of UK adults have drawn on a collective £60 million in savings and investments to supplement their income, while Scottish Widows has found that almost one in 10 adult children have had to bail out their parents in the past year.

Here, George Ladds, head of investment and pension research at Fair Investment Company urges people to stop spending beyond their means.

"Recent figures from both Schroder's and Scottish Widows suggest that people are not just tapping their rainy day funds, these are long term savings that are being hit, and that is simply not sustainable.

"Dipping into savings every now and then for an unforeseen expense is what emergency savings are there for and they should always be built back up again ready for another rainy day. But when a financial situation has hit the point where savings are becoming part of everyday spending, something has to change.

"Like the Government, families need to tighten their belts and find ways to cut expenditure rather than continue to put such massive strains on their finances.

"The trouble is, we live in a buy now pay later society where a whole generation of people think they should be able to have whatever they want, even if they can't afford it. People need to understand that they have to live within their means, because eventually, it will catch up with them, and it is easier to do something about it now that have to deal with the consequences later.

"The first area to look at is the monthly budget; this may sound obvious, but too many people are failing to go back to basics and it is only when the household budget is properly reviewed that families can start to consider where savings can be made.

"Savings can be made in a number of areas including home insurance, gas and electricity bills and mobile phones, home phones and broadband. Replacing non essential items can be put on hold and luxuries can be cut back. Less expensive holidays and cars are other options.

"For those that have exhausted all other areas and really do need savings accounts to help supplement income, there are options in the market – but, although the income from the account will often become an important part of everyday living, the capital in the fund should not be dipped into every time things get tough.

"If we all put our minds to it, we could easily cut 10 per cent of our monthly spend, and if we could do 10 per cent, we could probably do 15 per cent. People need to start slashing anything that is expendable and start living within their means, because if they continue to ignore the problem, they will create long term problems not only for themselves but also the country as a whole.