Household finances reach new low

Empty pockets

Household finances are falling faster than at the height of the recession, according to a new survey.

Almost 40% of people saw their finances worsen between July and August in contrast to just 6% who reported an improvement.

The survey of 1,500 adults by Markit, a financial information services firm, found that August saw the biggest fall in take-home pay at the same time as inflation continued to squeeze people's spending power. As a result, there was the sharpest drop in savings this month since March 2009 and debt levels have risen for the fifth consecutive month.

Geographical divide

While the gloom reportedly affected all income groups, age ranges and regions included in the survey, there was a geographical divide. People in the north of England reported the fastest deterioration in their finances, while people in the south-east of England experienced the slowest decline.

The findings have been supported by a separate report from the British Retail Consortium (BRC). Its quarterly survey of footfall - which measures the number of people hitting the shops - showed a 1% drop in the past three months compared with a year ago.

"Fewer people are shopping because households are facing high inflation, low wage growth and uncertainty about future job prospects," says Stephen Robertson, the BRC's director general.

Read: Seven hidden perks in your pay packet

Things are not expected to improve any time soon as the consumer prices index (CPI) is expected to hit 5% by the end of the year – it's currently 4.4% - as the effect of higher oil and gas prices filter through to households budgets.

Improve your finances

So what can you do to improve your own household finances? Here are three top tips:

1. Check your utility bills - with all the major providers announcing price rises, it's never been a better time to shop around to find the most competitive deal.

Check out the Moneywise Energy Switcher to see if you could save money on your utility provider



2. Check your savings rate - if you have savings, take a few minutes to check what interest rate you are getting. Many accounts offer an introductory interest rate for the first year but after that the rate drops to below 1%. One of the best rates available at the moment is Coventry Building Society's Poppy Online Saver with a rate of 3.15% for the first year.

Check out this week's top cash ISA rates and top savings rates

3. Move your debt - anyone who has built up some debt in recent months should make sure they aren't paying over the odds for it. If it's on a credit card consider moving it to a 0% deal while you clear the debt, and if it's a personal loan make sure you have got the lowest interest rate possible.