Millions of consumers gloomy about their finances for 2014

A Which? survey finds millions of people relied on credit to pay for Christmas and feel their budgets will be squeezed even tighter this year.

With living standards squeezed and household bills continuing to rise, the survey finds people aren’t relishing their prospects for this year, with half (49%) of people expecting their household budgets to be tighter in 2014 than 2013. Only three in ten (29%) expect their family’s financial situation to improve in 2014 and six in ten (60%) consumers said they are already dreading the cost of their winter energy bill.

The research also found that a quarter (25%) of people, 13 million, could only afford to pay for Christmas by borrowing. Overall four in ten (42%) used credit cards, loans or overdrafts to fund their festive spending. A third of people (34%) also dipped into their savings, taking an average of £450 from their accounts.

Which? found 30-49 year olds used more credit than other age groups, borrowing £490 to pay for Christmas compared to the average of £350. They are also more likely to have dipped into their savings withdrawing an average of £570. This age group also feels most under pressure financially with 41% saying they are feeling financially squeezed.

The survey also reveals that:

•One in five (22%) say going into debt at Christmas has become a norm for their household – this rises to 30% for the under 30s.

•Seven in ten (69%) agree that Christmas wasn’t any the worse for having a bit less money to spend

•One in five (20%) say they use credit most of the time so Christmas is no different from usual

•One in five (18%) also say they spent as much as usual on Christmas despite not being able to afford it –  this figure increases to 29% for the under 30 age group.

•Three quarters (76%) of those borrowing money spend it on presents, with four in ten borrowers (44%) using credit to pay for food over Christmas.

•Around 2.5 million say it will take more than six months to pay off December’s debts.

•57% of 50-64 year olds agree their household budget will be tighter this year than in 2013.

Richard Lloyd, Which? executive director said:

“Despite continuing signs of an improving economy, it seems families are still really feeling the squeeze, with millions of households pessimistic about their finances in 2014 after relying on savings or debt to fund Christmas spending.

“We want a New Year resolution from the Government to do more to help hard-pressed consumers in 2014 by getting a grip on the cost of essential bills and a resolution from firms to make sure they are giving customers the best possible value for money.”

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