Research findings from Legal & General’s Deadline to Breadline Report has found that many UK households are overestimating their financial resilience – leaving them financially exposed.
As cost-of-living pressures continue to hit homeowners’ pockets, we take a look at what the financial landscape looks like for those living in Britain, and what you can do to protect and strengthen your financial position against future income shocks.
What is the Deadline to Breadline Report?
The Deadline to Breadline Report is a piece of research into the UK’s household finances, conducted by Legal & General. The report surveys a percentage of the UK population to create a model of the resilience of the average household’s finances.
What does the report look at?
The report looks at key areas of financial income and spending to determine how resilient UK households are financially. They consider things such as average savings and debt, cutbacks and expenditures, and investment into financial products such as insurance policies and pensions.
What did the report find?
The report concluded that many UK households are overestimating their ability to survive with no income. In fact, they estimate that the average household is just 19 days away from the ‘breadline’. In other words, they only have enough finances to get them through 19 days of average spending before their funds run out.
In addition, Legal & General found that people’s perceptions of their financial stability didn’t tally up with reality. When asked how long they thought they could survive on no income, the UK average response was 60 days – an overestimation of more than 215%.
The research additionally concluded that those living in Wales, the West Midlands, the South West of England, Northern Ireland, Scotland, and the North East of England, would all reach the breadline in less than the UK average of 19 days.
What learnings can we take from the report?
What the report shows is an urgent need for UK households to get a better grip on their finances in order to put a greater distance between themselves and the breadline.
As it stands, it estimates that the majority of UK households wouldn’t make it a month if their income was taken away, while some parts of the country would run out of cash in less than two weeks.
How can I improve my financial resilience?
- Create a budget
One of the quickest ways to get a full picture of your finances is by creating a budget. This doesn’t have to be anything too complex. What you’re basically looking to capture is your monthly outgoings versus how much you’re paying in each month.Start with a figure for your household’s cumulative monthly income. Then, begin recording all of the outgoings you’re committed to – things like council tax, broadband bills, subscriptions to Spotify and Netflix.
Next, include allowances for things like groceries. When you’ve captured all of your outgoings, you’ll have a clear picture of your financial position and can begin to look at where it might be possible to cut back or make savings.
- Pay into a savings account and/or ISA
With every penny you put away in savings you’re helping to improve your rainy-day fund – and your financial resilience.There are lots of financial products available that can help you to earn interest on your savings too, some of which – such as an ISA – are tax free.
- Invest in a protection product
Another way to quickly improve your financial resilience is by taking out insurance that offers to cover all or part of your income if you are unable to work due to accident or illness.Unlike statutory sick pay, protection products will pay out an assured sum, which you could receive as a one-off payment or in regular instalments.
Some of the protection products you may want to consider include Critical Illness Cover and Income Protection – Critical Illness would pay out if you were diagnosed with a qualifying Illness and Income Protection would pay a regular income were unable to work through accident or illness. If you own your home jointly or rely on a partner’s income, you could also look at taking out Life Insurance, which would pay out in the event of the insured person’s death.
Improve your financial resilience today
It’s never too late to improve your financial resilience. Simply contact our Protection advisers, with no obligation, to find out how much you could receive – in addition to statutory sick pay – if your ability to work is compromised by death or illness.
Click here arrange an appointment to speak to our Protection team.
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