Wednesday 17th January will be Britain’s poorest day in 2007

Today, a report by uSwitch.com, reveals that Wednesday 17th January is officially the poorest day of the year in the UK as households reach a “cash crisis”. For more than 14 million households (57%), December is the most expensive month of the year, leading to a serious spending hangover in January.

It is estimated that the average family accumulates 18% of their annual borrowing in December by spending twice as much as in any normal month. With the UK debt-mountain piling ever higher, at £1.268 billion, it’s no surprise that the financial stretch is never more keenly felt than as we face the traditional January ‘pay day blues’. uSwitch estimates that more than 5.3 million GB households (21%) received their December pay cheques one or two weeks early, meaning that the wait for payday increased from 30 to as many as 44 days.

The painful wait for pay day, combined with the knock-on effects of December spending (it is estimated that the average spend per household totals £579 at Christmas) culminate in a potential liquidity crisis for millions on January 17th as the UK faces its’ ‘Poorest Day’. Adding to the January spending hangover is the December increase in household bills, with costs rising across the board. According to the research, the average monthly gas and electricity bill rose by 12% from £67 to £75, whilst average spending on home and mobile phones rose from £39 in an average month to £43 in the most expensive month. The most startling increases were on grocery bills and money spent on friends and family, which rose by £47 and £142 (24% and 315% respectively).

To help combat the January spending hangover, uSwitch.com has teamed up with financial expert Cesarina Holm Kander, presenter of Channel 4’s Your Money or Your Wife, to develop some practical tips – ‘How to recover from the January blues’ – to take control of your finances after Christmas over-spending.

Cesarina says: “Christmas is a difficult time for everyone as we feel the obligation and desire to spend more and more. There are some common pitfalls that people should do their best to avoid. Perhaps the worst offenders are store cards and credit cards, which prolong the spending hangover with extortionate rates. To get the best deal, shopping around to compare cards and introductory offers is essential - the average interest rate on credit cards is currently 15.9% APR, around 11% above base rate. It’s also important not to fall into the ‘minimum repayment trap’ as so many people do – currently 3.4 million credit cardholders in the UK regularly make only the minimum repayment, this could extend their debt sentence on their credit card to 24.5 years.”

To make ends meet, UK householders admit to adopting a range of money-saving initiatives and cutbacks including:

20% cutting back on basic utilities including heating and using the phone
18% selling their possessions, either privately or via e-Bay, including returning Christmas gifts to stores
33% using credit cards and store cards for purchases, rather than debit or cash
23% making only minimum repayments on credit cards
24% will save pounds by cutting back on food purchases
51% will simply stay at home for the month or go out less

According to the study, commissioned by uSwitch.com and carried out by YouGov among 2,241 GB adults, more than 7.5 million households (30%) say it will take them between two and three months to recover financially from the January debt burden. A staggering 1.48 million families in the UK – say they will not recover for up to six months.

Nick White, Director of Personal Finance at uSwitch.com says: “The impact of the January financial blues is not restricted to the poorest families. With Britain’s personal debt levels increasing by £1 million every four minutes, it is clear that consumers need to take some personal responsibility and carefully manage their own financial situation. One person falls victim to insolvency every minute of theworking day - this is a 66% increase on the same quarter last year.

“These trends highlight the need for basic money education for all and the Government’s decision to educate young people on personal finance matters is a step in the right direction. Ultimately, people must take responsibility for their own finances but the Government has a duty to ensure consumers receive the right information, understand the choices open to them and are empowered to make good decisions, whilst being aware of the consequences if they don’t manage their money effectively.

“If the Government is serious about tackling the £1,268 billion mountain of debt it must take immediate action to equip people with the right tools to make the right decisions.”