Interactive Investor

More than a third of Britons think cost of living crisis will stymie financial goals

3rd May 2022 09:16

Myron Jobson from interactive investor

Our senior personal finance analyst comments on the latest interactive investor poll.

More than a third (36%) of consumers believe the cost-of-living crisis will prevent them from hitting financial milestones, according to a poll by interactive investor.

The poll of more than 3,000 interactive investor website visitors between 21 and 25 April 2022, found that one in five (21%) expect to delay retirement as a result of rising prices. Another 15% of the sample said the cost-of-living squeeze will stop them from paying off their mortgage (4%), buying a house (3%) paying off credit card debt or a loan (2%) or another financial milestone (6%).

When it comes to the areas of expenditure that worries them most from an affordability perspective, almost two thirds (63%) of the sample cited the rising cost of energy, ahead of their ability to keep up with spending on leisure activities and entertainment (17%). The rising cost of fuel and food were cited by 10% and 8% of respondents, respectively.

However, the cost-of-living crisis is the second-biggest threat to personal finances among the sample, cited by almost a third (30%) of respondents, behind a stock market crash (50%), with a recession ranking third (10%).

Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The spiralling cost of living has forced many consumers to put the champagne on ice after coming tantalisingly close to reaching a financial milestone. Runaway inflation means that consumers face an uphill battle to keep up with day-to-day expenses - let alone to edge closer towards achieving long-term financial goals.

“Those who were contemplating retirement in particular have been hit by a double whammy of ballooning inflation and stock market underperformance, forcing some to remain in employment. There is little reprieve for retirees in waiting with higher prices set to be the status quo for some time, and the cost-of-living squeeze set to intensify amid inflationary pressures from the ongoing Russia-Ukraine war, pushing retirement further out of reach for many.

“For most of the sample, the inflationary pinch is most felt from their energy bills, which are set to rise by £693 a year following a rise to the energy price at the start of April. Two years of Covid lockdowns and social restrictions has resulted in pent-up demand for leisure activities and entertainment outside the home, but almost a fifth of survey respondents fear that these areas of expenditure will soon become unaffordable.

“Keeping tabs on your spending amid the escalating cost of living crisis is important to ensure that you remain financial stable today without compromising on achieving tomorrow’s financial goals.

“For investors, the current stock market malaise is the most pressing concern, with the FTSE All-Share, S&P 500 and the MSCI Word indices all down since the start of the year, and even the most celebrated funds have stumbled. Volatile markets mean there may be more bad days than good days, but avoiding knee-jerk reactions and sticking with your convictions can make all the difference. History might not be repeated but all the evidence shows us that markets grow over time, which bodes well for those who aren't seeking to withdraw their cash anytime soon.

“Drip-feeding money into stock markets is an effective way to lower risk while investing. The idea is that making small but regular payments reduces the risk of a big hit. By regularly investing the same amount, you also buy fewer shares when they are expensive and more when they are cheap to deliver a smoothed return”

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