'No Pay Day' leads to debt and borrowing

Article date: 9 January 2008

  • Average Brit will run out of money on 9 January

Cash-flashing Brits who didn't plan for festive spending, and an early pay day in December have run out of money, barely over a week into the New Year, new research reveals today.

The Norwich Union study shows that 9 January is "No Pay Day" for over 40 million people who will have run out of money and be dipping into their savings and relying on credit and loans to keep themselves afloat until their next pay day.

Alarmingly, one in five (19%) don't think it's likely they'll be able to cover all their household bills in January. It's little wonder then, that nearly half the population (43%) find January to be the most worrying time of the year financially.

The research also reveals that Brits on average spend an additional £781.86 over the festive period on gifts, fun and the sales:

  • Christmas gifts - £379.81
  • Festive food and drink - £137.12
  • Socialising - £113.88
  • Sale shopping - £105.22
  • Travel - £45.83

Worryingly though, over one in three (35%) people think slipping into debt in January is inevitable and there's nothing they can do about it. 16-24 year olds in particular have a "spend now, save later" attitude as the study shows they are twice as likely as their parents to overspend at Christmas because of a lack of saving know-how.

When "No Pay Day" hits, Brits will start relying on credit first and foremost, followed by savings and even the "bank of Mum and Dad" to make ends meet in January:

  • Overdraft facility - 19%
  • Credit cards - 16%
  • Savings - 14%
  • Family and friends - 4%

Cesarina Holm-Kander, financial expert, says: "To find nearly half of Brits know their monthly salary won't cover the cost of Christmas and New Year is truly shocking.

"I'm genuinely concerned by the findings of the Norwich Union report. To see that so many people will be struggling so very early in January is worrying, especially since the financial environment is so widely reported on. ‘Credit crunch', the end of cheap credit and increasing bankruptcies are a reality, yet people spend like there's no consequence. There is.

"Times have changed; bills are rising not falling and there really is no such thing as free credit anymore. The ‘spend now, pay later' culture has to stop. I hope this month is the shock that finally gets that message home. Let this January be the last when you have a ‘No Pay Day' before you have even reached pay day!"

Cesarina's steps to solving your financial worries:

  1. Get a grip on your finances and get your head out of the sand today. Ignoring the problem won't make it go away; it will just make it worse
  2. Create the time to sit down with all your bills and see exactly how bad the situation is
  3. Work out what your monthly budget and disposable income (ie what you have left after you've paid for mortgage/rent; bills and essentials) are
  4. Put the two together and see what you can afford to pay off. Pay off as much as you can, as quickly as you can, starting with the debts with the highest interest rates
  5. If you can't afford to meet your monthly budget AND repay that Christmas overspend (and the credit you'll be using in January to get you through to pay day!), seek advice from the CCC or the CAB
  6. Top tip - avoid companies who advertise debt solutions; they are in the business of making money from your debt so make sure you take advantage of the great, independent and free sources of debt advice
  7. Turn your thoughts to averting a cash crisis next Christmas, as soon as you've dealt with this year's. Christmas is hardly an unforeseen event so start planning now
  8. Set up a savings account and use a direct debit to move a small amount of your income into it every month. Just £25 per month is a Christmas kitty of £300 in 12 months
  9. Pick up a few gifts each month f you do find yourself with spare cash throughout the year. There is no law that says you can only buy them once the stores have got their tinsel up! Use your brain, not your plastic!
  10. Be proactive and in control of your finances, instead of reacting with panic come January, it's a far healthier way to manage your finances and your stress levels!
  11. Lastly, don't groan at any of this! Being on top of your finances and without the burden of debt and its stresses is more liberating than boring.

Paul Stokes, head of marketing and communications from Norwich Union, advises: "Everyone wants to have fun and enjoy the festive period but a little planning could mean people start the year with a little less financial worry.

"It's not about taking drastic action, even if people just tot up what they spent this year and think about saving a small amount each month from February onwards they'll be in good stead. They'll be more likely to be able to spend guilt-free when December comes and not start another year in a financial mess come 2009."

Additional research findings

Savvy money saving skills:

  • Nearly a quarter of women (22%) recycle a gifts they've received from some else and pass them off as new in order to save money
  • One in 10 Brits have sold personal items in order to raise some extra cash over Christmas
  • A sneaky 6% of shameless Brits have returned a gift just to get money back and bank some funds.

Spending of the sexes:

  • One in three (31%) women are likely to get into a financial fix compared to less than a quarter of men (22%)
  • Nearly half of women (48%) say their salary won't cover their Christmas spending compared to two in five men (40%)
  • Women are far worse at financial planning that men; 31% don't plan and end up overspending compared to just over one in five (22%) men.


For further information:
Jessica Gooch
Telephone: 0207 908 6447 / 07970 152155
E-mail: jgooch@lexispr.com

Jess Silver
Telephone: 0207 908 6545 / 07968 616774
E-mail: jsilver@lexispr.com  

Notes to editors:

Norwich Union commissioned research with Tickbox.net amongst 1,084 adults in employment across the UK, between 18 December and 27 December 2007.

About Norwich Union  
Norwich Union is one of the UK's biggest life insurers. It is a leading provider of life, pensions and investment products and one of the largest financial adviser (FA) providers. FAs provide over 70% of the company's long-term savings business in the UK.

Norwich Union has strategic alliances with building societies and other leading UK brand names including CIS and The Royal Bank of Scotland Group. Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media

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