According to the Markit Household Finance Index, optimism about family finances in 2014 is at its highest level since 2009.
The index is based on a survey of 1,500 households across the UK.
It rose to 42.1 in February from 41.7 in January.
Despite the growing optimism, any figure under 50 represents a deterioration in finances. We might conclude that things are getting ‘less worse’.
Looking ahead, the Future Household Finance Index recorded a figure of 50.7 in February, up considerably from 46.1 the previous month.
This figure above 50 suggests households believe there will be an improvement in their family finances over the next twelve months.
We hear a lot from politicians at the moment about a ‘cost of living crisis’.
Despite price inflation, as measured by the Consumer Prices Index (CPI), having fallen recently to below the 2% government target for the first time in several years, wage growth is even lower.
This means there has been a widening gap between what households earn and what they spend.
With the UK economy now growing again, and interest rates staying low for the foreseeable future, we might expect to see a period where wages exceed inflation and household finances gradually recover.
What every household needs to have is a plan for this recovery; making sure that earnings are allocated in the most efficient way possible to service debt, cover outgoings and invest for the future.
Do get in touch to find out how Financial Planning can help you make the most of what you have today and get you on the right track to have what you need in the future.
