Following the October announcement by the Office for National Statistics showing the Consumer Price Index (CPI) had fallen from 2.5 per cent to 2.2 per cent in September, protection specialist LV=’s annual ‘Lifestyle Inflation Index’ [1] reveals Britons have spent a huge £158 billion on what they consider to be their ‘lifestyle essentials’ in the last year alone despite a drop in inflation.
Annual spend on ‘lifestyle essentials’
These top ten ‘essentials’ include holidays, meals out, TV subscriptions and that all-important haircut, but the luxury shop-bought daily coffee has fallen out of the top ten for the first time. The average annual spend on ‘lifestyle essentials’ is £6,194 per household (£5,850 in 2011), with the UK as a whole spending £9 billion more than last year on these items, despite almost one in five (19 per cent) people suffering a pay freeze during the same period [2].
Light at the end of the tunnel
The Lifestyle Inflation Index found the ‘essentials’ (see table one) have an overall inflation rate of 3.2 per cent to August 2012, significantly more than the increase in the nation’s pay packets over the same period (1.5 per cent). However there is some light at the end of the tunnel as the inflationary rate of some ‘lifestyle essentials’ slowed in the last year, with nights out at 2.5 per cent from 6.6 per cent in 2011, and takeaway meals increasing by 2.1 per cent compared to 5.6 per cent.
Households are still firmly in need of their routine escape as holidays and weekend breaks remained the lifestyle element deemed most essential, with households spending £3,250 each on average, over £83 billion collectively. Restaurant dining accounted for just over £20 billion of household spending in 2012 (19.4 billion in 2011) and takeaways/delivery meals exceeded £12 billion (£7.8 billion in 2011).
Cutting back to save the pounds
In order to afford the more ‘luxury’ items people deem essential to their lifestyle, over three quarters (78 per cent) say they are making cutbacks in areas of household spending. The most common cutback is buying cheaper or own brand basic food (48 per cent). The ‘economising’ theme continues, with one third (34 per cent) stating they have switched to buying clothes and other personal items at cheaper shops than they may have in the past, and one in five (20 per cent) say they are buying clothes and other personal items second hand.
The need to get away from it all is important to people when economic times are hard, which explains why holidays and weekend breaks remain the lifestyle aspect that most people are most unwilling to do without. It is no surprise that people are trying to ‘keep calm and carry on’, and making cutbacks in other areas to maintain the little luxuries in their life.
Other cut-backs Britons are making in order to lead a life of luxury
– A third (32 per cent) save money by regularly taking their lunch to work instead of buying it
– One in ten (11 per cent) take their own tea or
coffee into work
– One in six (16 per cent) grow their own fruit and vegetables in order to save money
Being unable to cover the real day to day essentials
It is clear that these lifestyle luxuries are central to many people’s happiness. However, people need to consider how they would continue to pay for the real essentials should their financial circumstances change. Over eight in ten (83 per cent) working adults said they do not have any protection in place to cover their income should they be unable to work due to accident or illness, leaving many at risk of not only missing out on their ‘essential luxuries’, but being unable to cover the real day to day essentials, such as their mortgage, food and energy bills.
