The difficulties some were experiencing were brought into sharp focus by deprivation and arrears on bills or credit commitments.
The study revisits research first undertaken for the Money Advice Trust in 2009, when it was found that people whose financial situations had not worsened were nevertheless exercising ‘precautionary restraint’ in relation to their spending.
The evidence from the recent study, in stark contrast, pointed far more clearly to households making changes in their everyday spending as a result of recent or more prolonged changes in spending power. For some, this meant shopping ‘smarter’ or cutting back on non-essentials. For others it extended to finding ways to save on gas and electricity and selling the family car or pet.
Despite widespread efforts to tighten their spending and money management, there was considerable evidence that households were continuing to rely on unsecured credit, and increasingly so in some cases. While they were using credit cards, overdrafts and store cards with the same frequency and for the same reasons as before, they were not clearing the balance as they had in the past.
Participants perceived that mainstream consumer credit was difficult to access, and expensive. Some were conscious of the importance of maintaining a good credit rating. Others implied that they were actively retaining unused credit cards and overdrafts due to anxieties about whether they would be able to access new borrowing if and when they needed it.
Despite showing clear signs of financial strain, participants did not necessarily perceive themselves to be in financial difficulty. It was primarily a perceived lack of need that meant most households had not sought money or debt advice. Some felt they did not need advice because they weren’t “really struggling”, despite showing signs that they were indeed stretched or in some degree of financial difficulty.
Andrea Finney, co-author of the research carried out by the University of Bristol’s Personal Finance Research Centre, said: “The resolve that people on low and middle incomes show in creatively and in many cases effectively adjusting to their straitened situations is admirable. But ultimately, households can find themselves at the limits of their resources with nowhere else to go.
“The study findings underline the continued need for Government to ensure that robust policy responses provide the security that the most vulnerable households need to get by, and to continue to support free-to-client debt advice services through centralised funding.”
Joanna Elson OBE, Chief Executive of the Money Advice Trust, said: “For the time being we may be out of the technical recession, but the ‘public’s recession’ has never gone away, in fact it’s been getting steadily worse. Free, impartial advice is available and can make a real difference. Unfortunately, too few people recognise their own financial difficulty as a problem they have to solve, and instead cut back further and further and increasingly rely on credit.”
Anyone with concerns over their finances should contact National Debtline, visit MyMoneySteps.org or go to their local Citizens Advice Bureau for free, impartial advice.