More spare cash – a welcome prediction!

more spare cash for families

more spare cash for familiesA new study claims the squeeze on family finances will soon finally ease, freeing up more spare cash for households across Britain.

According to the Centre for Economics & Business Research (CEBR) quarterly UK Prospects report, household disposable income will rise faster than prices in 2013 for the first time since 2010.

Families across the country have had to endure a difficult time of late due to the struggling economic climate, but this news represents a positive outlook for the future.

What does it mean for me?

The slowing price growth is expected to boost spending power for households and give the Bank of England more room for manoeuvre in keeping interest rates on hold until 2016.

A combination of higher, tax-free personal allowances and falling inflation means that family budgets will also stretch further in 2013, letting you splash out more when it comes to life's little luxuries.

Inflation has already fallen from 5.2% in September last year to 2.4%, with the CEBR predicting a further fall to 1.6% next spring.

An expected 1.8% average for the whole of 2013 would mean inflation undershooting the Bank of England's central target of 2%, meaning families will still make considerable savings on purchases.

According to the report, the weak global economic environment is expected to curb global commodity prices over the coming quarters, bringing inflation down across much of the world.

However, Scott Corfe, senior economist at the think tank and main author of the report, states that change won't happen overnight.

He said: "Consumers have been hit hard by declining living standards in recent years. Even with growth from 2013 onwards, real disposable incomes aren't expected to surpass their 2010 peak level until 2015"

Increase in personal allowance

Next April, a record £1,100 increase in the income tax-free personal allowance from £8,105 to £9,205 will also help boost household spending power in the UK.

This means you will be able to earn £9,205 before you have to start paying tax on your earnings.

Other ways to boost your budget include cutting back on takeaways and other unnecessary outlays like monthly magazines or gym membership. You can save money on pretty much everything, you just need to sit down and take a closer look your expenditure.

Knowing how to budget is therefore a useful skill to have and it's more straightforward than you think!