In this blog we will break down what the concept means and the impact it is having across society. The UK economy is feeling the impact of Brexit, the pandemic and the Ukrainian war. Inflation is rising which means the cost of goods and services are soaring. Unfortunately, wages and salaries are not increasing at the same rate as inflation, significantly reducing people’s disposable and discretionary income. This is resulting in basic amenities becoming unaffordable for many people.
Disposable income is the amount of money a household has left after their fixed commitments are paid for, such as: mortgage or rent, utilities, child care, car agreements, loans, credit cards etc. Discretionary income is the amount of money left over after variable but necessary items have been paid for, such as: overdraft, fuel, food, clothes, toiletries etc. Non-essential goods and services, like leisure, entertainment, travel, saving, investing and luxury items, tend to get purchased after all necessary items have been covered. However, in this current economic climate, many households are struggling with reduced disposable and discretionary incomes which is reducing the amount spent on non-essential goods.
Individuals and households are struggling with the rising costs of food, fuel and utility bills. Some groups are feeling it more than others, but most people have been affected by it in some way, shape or form.
Businesses are also impacted by inflation with increases to general operational costs, such as utilities to run premises, fuel costs to complete services and deliveries, and supply chain expenses for goods, materials, hardware & software. With consumers budgeting more and spending less, businesses providing non-essential products and services are already feeling the pinch. In summary, everyone is impacted by this situation and we are in this together.
Stay positive! Whether you are an individual, household or business…now is the time to review your finances and ensure you understand what your fixed and variable commitments are. Plan ahead, budget for the necessary, and reduce spending on non-essential items to buffer and mitigate any further rises in inflation.
This situation is likely to get worse before it gets better, but the team at Fintellity will stay on top of the latest news providing financial education and useful tips. We will continue to innovate and work with our partners, charities and civil services to help individuals and businesses get through this tough climate.
There are lots of money saving tips available online. Take a look and see how many you can implement to help you become more saving savvy!
We look forward to hearing any feedback or receiving suggestions.
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