Brits living on a budget to curb credit crunch fears

Two thirds of UK adults (66%) – that’s more than 30 million people – are planning to tighten their belt financially this year because of the “credit crunch”, according to research from Friends Provident, the FTSE 100 life and pensions company.

Making a budget is the top priority for two fifths of consumers (41%) who plan to economise. The research found that one in three people (33%) are planning a total overhaul of their finances as a result of the global credit crunch to see how they might be able to secure better deals on their finances. Three quarters of these people (75%) believe they will be able to save money via a financial makeover, and almost a quarter (23%) anticipates saving more than £500 in the process. One in seven (14%) will limit their spending by cutting back on socialising and their hobbies in order to tighten their belts financially, while 13% will curb their spending by taking scissors to their credit cards. For one in 10 (11%) Brits, their path through the credit crunch will be to look for a better paying job.

In a year where the family purse strings may be tighter than ever, 7.5 million people expect to go cap-in-hand to borrow money from friends and family because of the credit crunch. Two in five men (22%) expect the door to swing the other way, with family and friends coming to them for a loan.

However, people will be cautious about lending to a friend in need this year. Half of people (51%) have lent money to friends before, but more than a quarter (28%) never saw the cash again and eventually two fifths (40%) to receive what they were owed. The overwhelming consensus, by 85% of Brits, is that lending money to, or borrowing money from, friends can sour friendships.

James Ward, director of marketing at Friends Provident, said: “The credit crunch is already impacting on consumers, both financially and psychologically. Our research found that 40% of people are worrying more about their finances because of the credit crunch. The trick is to harness this heightened awareness and to do something positive, like overhauling your finances, budgeting effectively, and investing your money in a way that makes it work smarter for your needs.”