On average, right now, just over half of Brits (51%) pass the threshold of having enough money left at the end of the month to be considered resilient, according to the HL Savings and Resilience Barometer.
But over the next 12 months, the proportion of people passing the threshold will plummet to just 12%.
Those who are most likely to fall short include lower earners, young people, renters and those in poor health.
The biggest falls will be among some of the groups who tend to have plenty of cash left at the end of the month – including higher earners and homeowners.
Those who are least likely to have surplus cash in 12 months’ time will be the same groups as now, but they’ll be in a much worse position.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “Already half of us are running on empty as prices rise on all sides, but the sheer scale of hikes in the cost of living over the next year will slash the proportion of those who can comfortably make ends meet to just one in ten.
“Those who are struggling now will face impossible challenges, and those who may consider themselves to be relatively comfortable face the most spectacular drops in their resilience. It means we all need to prepare for higher prices this year.
Who is struggling now?
“Unsurprisingly, the less income you have, the lower the chance that you have enough cash left at the end of the month to be considered resilient, so that fewer than 1% of the lowest fifth of earners pass the threshold, and less than 14% of the second fifth.Â
“It’s partly because they tend to earn less that younger people and renters are also more likely to be struggling right now, with just two in five renters passing the threshold, and fewer than one in four of Generation Z doing so. Renters also suffer from the fact they tend to spend a much bigger proportion of their income on housing costs, which leaves them vulnerable to price rises.
“Those in poor health may also be struggling to hold down a job, which is one reason why they’re less likely to meet the resilience threshold. Only one in four of them do so, compared to almost two in five of those in fair health and over half of those in good health.
“Single people also face enormous challenges, because there’s only one income to keep the household afloat, and it’s getting stretched in so many directions. Among those living on their own only a third pass the resilience test.
Whose resilience will fall furthest?
“Some of those groups where the most people pass the resilience threshold face the biggest drops in resilience over the next year. This includes the top fifth of earners, who will see the proportion passing the threshold fall 56% and the next fifth who will see it drop 59%. That’s one reason why Londoners will also see resilience drop by 47%.
“Rising interest rates also mean that homeowners with a mortgage will see the biggest hits to their surplus income – with almost a 50% drop in the proportion crossing the resilience threshold – compared to a fall of a third of renters.
Who will struggle most in a year?
“The scale of the fall in resilience is dramatic across the board – so that we’ll go from a position where 51% of people pass the resilience threshold to one where only 12% do. Despite the huge resilience falls among higher earners, those who are struggling now will continue to suffer the most in a year’s time. It’s just that far more of them will face impossible challenges.
“Renters will be in an incredibly difficult position, as the percentage passing the threshold drops from 40% to just 4%. Likewise, among Generation Z, it will fall from 24% to 0.8%, among single parents it will fall from 29% to 3%, and among those in poor health it will fall from 26% to just 3%.
What should we do?
“The shortage of cash is something that’s going to hit us all, regardless of how well off we are now. Our reaction will depend exactly where we stand, and how much wiggle room we have in our budgets. There will still be some higher earners, for example, who can save by shopping around and cutting luxuries from their budgets.
“For those on lower incomes, who are already facing incredibly tough times, it means exploring every possible avenue for help. It’s vital to see what state support is available, not just because these payments can be hugely valuable, but because they may also open the door to at least the second half of the cost-of-living payments.
“It also means speaking to charities that exist specifically to help people in these kinds of tough situations – like Citizens Advice and Stepchange. They can explore whether there are any grants or payments that you haven’t considered, and Citizens Advice will be able to guide you towards help that’s available locally within your community.
“These might not be things you have ever considered before, but we’re seeing the biggest hit to living standards in a generation, so now is the time to ask for help. There’s enormous strength in recognising when you need some support.”
