Monthly bills raise UK personal debt by a third

UK personal debt has increased massively over 2022 due to the cost of living crisis and monthly bills, with 68% of people feeling stressed about finances

Monthly bills are the main cause of increased personal debt and stress for half of the adults living in the UK, with 46% of 25-34-year-olds taking out an additional credit card or loan to cover the increasing cost of living.

However, this issue is not nationally experienced, as only 9% of Brits who are 55 and older experience this stress and have taken out additional credit cards.

Due to soaring bills and costs in shops, the average adult’s personal debt – discounting mortgages – in the UK has risen from £25,879 to £34,566 (£8,687) in 2022, with four in five adults revealing they have started 2023 in debt, up from three in five in 2021.

Almost one in ten Londoners owe more than £50,000

Debts are generally higher in the East Midlands, with 17% of residents reporting outstanding debts between £10,000 – £50,000, compared to just 3% in Scotland. However, Londoners were most likely to have the largest debts, with 9% of the capital’s population owing upwards of £50,000.

Shockingly, many Greater London residents use around 25% of their wages to pay off their debts, which is the most of any UK region.

In terms of saving money, residents in Newcastle put the most aside a month. At £399, they save 58% more than the UK average (£252). Those living in Norwich can contribute the least to their savings, with just £130 a month, almost half (52%) of the national average.

The average UK credit card holder will go into 2023 with £2,647 of credit card debt, with citizens of Belfast averaging £3,910, the most of any UK capital. This is 271% more than Edinburgh (£1,052), 228% more than Cardiff (£1,193), and 73% more than London (£2,260).

Why have these debts increased so much, and how are people working with them?

19% of adults’ debts are from the last 1 – 6 months, but another 19% are from 1 – 2 years ago, suggesting an influx of debt caused by the cost of living crisis and the Coronavirus pandemic.

This has left around 60% of adults across the UK reporting having their finances and personal debt worsen over the course of 2022.

In order to pay off their debts, 47% of people have been allocating monthly income. However, one in ten adults are unsure how they will pay their debts at all.

James Andrews, a personal finance expert at money.co.uk, comments: “Between soaring energy bills and volatile mortgage rates, 2022 has been an unstable economic year for the UK.

“2022 has been an unstable economic year for the UK”

“Bills, like energy and water, have had the biggest financial impact this year. More than half (53%) of those who have seen their debts increase thanks to the cost-of-living crisis feel that they would be debt free if not for costlier bills. Living expenses such as groceries were the second most impactful expense, affecting 48% of those whose debts are a result of the cost of living.”

Money saving tips for personal debt

James Andrews, personal finance expert at money.co.uk, offers his tips on how to save money: “With debts consistently rising each year, saving where you can is even more important, but more difficult than ever.

“The first thing you need to do when looking to boost your savings is to take stock of your current position. We’ve got a full guide to writing a budget here if you need a little help.

“Once you’ve done that, it’s time to assess where your money’s going. If things are tight, or even if they’re not, it makes sense to reduce your costs.

“If you can pay less interest on your debts – by moving to a cheaper loan or even a 0% credit card- you should. After all, it makes no sense to pay banks more than you need to. There are a string of other bills you can cut without having to change your lifestyle too – from broadband to mobile phones to insurance.”

Savings accounts and instant access accounts

Andrews continued: “If you’ve got a monthly surplus at the end of this process, diverting some of that to a savings account you can draw on in times of need makes sense.

“Setting up a direct debit to move cash straight into your savings account each month helps automate the process, letting your savings build up without you thinking about it. However, it makes no sense at all to go overdrawn as a result of this – so you might prefer to make the payments yourself.

“If you’re doing that, the day before payday is a great time to move money – as you can see exactly how much you have left over to move. Setting a reminder in your calendar to check this will help you remember to act.

“You should also look to make the most interest you can on the money you’re putting away. The top-paying instant access accounts are currently offering more than 2% interest, so any money you have that’s earning less than that should be moved.”