Takeaways, clothes and holidays are the luxuries people plan to cut back on as the cost of living crisis continues
As the UK’s economic downturn continues, a new study commissioned by the UK’s leading digital bank, Monzo, has uncovered Brits’ financial concerns, projected spending habits, and savings outlooks for the year ahead – with the majority concerned about the cost of living crisis worsening.
Increased energy costs, interest rates and prices of essential goods have compounded to create a challenging climate for many, with three in five revealing they don’t think they’ll have enough money to make it through 2023 comfortably.
Consequently, 92% of the nation expect to be cutting back on their spending, with the average UK adult looking to reduce their weekly budget by 34% this year.
Takeaways are the most common luxury people are looking to cut back on in 2023, followed by clothing, shoes and accessories and holidays. Looking at spending on everyday essentials, just under half of those surveyed by Monzo have already cut costs by shopping at a cheaper supermarket.
When it comes to setting financial goals for 2023, two-thirds said the prospect of saving in the current climate felt overwhelming. Worryingly, one in five admitted that they won’t be able to save anything at all this year, with rising bills the most common reason for this.
In fact, over a quarter said they’ve had to give up on their dreams of owning a home as a direct result of the cost of living crisis.
Of the few who think they will be able to save in 2023, 39% are putting money away to treat themselves on a holiday. 28% said they are adding to a general ‘rainy day’ pot for emergencies and unexpected costs, while one in five are saving to make home improvements.
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The study also found that three in five people have never heard of savings challenges – simple budgeting activities that help people to achieve specific financial goals, often in a more manageable, realistic way. But encouragingly, those who had taken part in such challenges have saved over £1,700 on average.
To help people feel more empowered to save smaller in 2023, Monzo has partnered with Alice Tapper, who has shared her top financial tips for 2023:
- Take a look – Sometimes, the first and most important step to feeling more in control of your money is to simply take a look at where it’s going. Some people find open banking apps helpful, as they let you see all of your accounts and subscriptions in one place.
- Break it down – Mental accounting is a principle in behavioural economics, which means our brains find it much easier to manage our money when we break it down into categories. With Monzo you can use ‘pots’ to do this (they’re a bit like digital piggy banks). Some people find it helpful to open up pots for different life categories and saving goals, for example, a home renovation or their next holiday.
- Automate your finances – The secret to sticking to your financial goals is automation. Life is busy enough and remembering to pay bills, save money, pay off debt only makes it busier. Use things like standing orders and direct debits where possible and have a go at using a saving app that helps you save without thinking.
- Hold on to the joy – We’ve all got a thing that we would really struggle to cut out of our lives and yet annoyingly, it’s often the first thing financial experts tell us to cut back on! Whether it’s the twice-monthly takeaway or our coffee from that little place on the corner. As opposed to forcing yourself to avoid the things that bring you genuine joy, take 30 minutes to look through your spending, and identify the joyless, non-essential items that either you can cancel/cut completely or find a cheaper alternative.
- Take up a challenge – If you want to spice up your saving even more, why not start a savings challenge. There’s an app called IFTTT (It stands for ‘If This, Then That’) and it lets you link your Monzo account to other apps and set up rules to move your money around automatically. The 1p Saving Challenge involves saving a little money every day, starting with 1p. The next day you save 2p, the day after 3p. After a year, you’ll be setting aside £3.65 on the final day and have a total of £667.95 in savings!
Sujata Bhatia, Monzo’s Chief Operating Officer, comments, “Understandably, the prospect of saving is daunting for many at the moment, but it doesn’t have to be. At Monzo, we know that saving small amounts over a long period of time can still have a hugely positive impact on your finances. Monzo customers saved over £175 million last year using our saving tools and features, such as Round-ups, meaning whenever more than £1 is spent, the difference is rounded up and added to a Savings Pot automatically, and IFTTT challenges.”