Money Wellness
Image of a woman looking over receipts and bills. Five million people living in negative budgets
category iconcost of living
calendar icon12 Feb 2024

Five million people can't afford basic outgoings

Research from the Citizens Advice has revealed that five million people are living in a negative budget every month.

This research supports our data which shows 69% of people who contact us for help each month have nothing to live on after bills are paid, with a further 15% being left with a disposable income of between £100 and £0.

According to Citizen’s Advice, the number of people living in the red has jumped from 3.25 million since the start of 2020 - that’s more than 50% in four years. And includes 1.5 million children who’re living in households that have more money going out than coming in.

More people are struggling because of rising energy and housing costs.

Private renters living in negative budgets are spending nearly three-quarters (73%) of their income on these two costs alone, leaving little for other essentials. Homeowners are faring slightly better, with mortgage holders in the same situation spending 43% of their income on energy and mortgage costs combined.

Despite falling inflation, the cost of essentials remains stubbornly high with 2.35 million people cutting back on things like meals, energy and seeing friends and family.

The research comes ahead of a general election later this year. And, with more households struggling that ever before, the cost of living is going to be a key when it comes to polling.

In fact, four in five (79%) of voters say negative budgets are an important issue to them. However, Citizen’s Advice has warned that politicians are failing to address the root cause of people’s costs far exceeding their income and are instead relying on short-term handouts.

The charity has recommended a series of measures that could immediately lift 1.1 million people out of a negative budget. They include uprating benefits using the Household Cost Indices – a measure that more accurately reflects the rate of inflation for low-income households – as well as improving energy bill support and reforming Local Housing Allowance.

What’s a negative budget?

If you have a negative budget each month your outgoings are exceeding your income. Households who live in negative budgets often have to go without essentials and have to make difficult decisions to cut back on things like food and utilities.

Many people who find themselves constantly in a negative budget eventually fall behind on essential (priority) payments such as rent, mortgage, council tax and energy.

75% of the people who contact us every month have priority arrears with council tax and utility being the most common.

What should you do if you have a negative budget?

If you’re in this position, don’t panic. There are lots of things you can do to help yourself.

But ignoring the situation is not an option as it’ll only make it worse and you’ll fall further into debt or face serious consequences such as losing your home, being taken to court or having your electricity and gas supply switched off.

Here’s our complete guide on what to do if you’ve got a negative budget.

Avatar of Caroline Chell

Caroline Chell

Caroline has worked in financial communications for more than 10 years, writing content on subjects such as pensions, mortgages, loans and credit cards, as well as stockbroking and investment advice.

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