Nearly half of UK adults recently surveyed confirmed that they would describe themselves as ‘JAMs’ i.e. those that are ‘just about managing’ financially. Indeed in Coventry, Chelmsford and Bristol the proportion is higher at nearer to two thirds.
These families have been referred to in different ways by politicians over the years; ‘hard-working families’, ‘the squeezed middle’ and ‘alarm clock Britain’, but the recent catchphrase is ‘JAM (Just About Managing). Whatever the phrase, in terms of vulnerability JAMs are particularly exposed currently due to the slow growth in income levels, an increase in essential living costs and the freeze on working age benefits introduced in April 2016.
The survey revealed that in many cases money set aside for essential living costs such as food was being used for unexpected expenses. For families that are ‘JAMs’ there is often very little slack in their budget to cover unexpected costs; the survey conducted by personal loan company Provident Personal Credit reveals that 20% admitted that anything over £100 more than expected is simply unaffordable.
The upshot is that many of these families turn to credit to manage these unexpected expenditures and if they have a poorer credit rating it is the ‘short-term high cost’ credit options that are the only option. This in turn creates another monthly expenditure, the repayments which are also unaffordable.
According to think tank The Resolution Foundation, there are 6 million JAMs in the UK; working age households on low to middle incomes. Jam households are not always ‘low-income’ and some making £50,000 a year can be struggling where they have several children and higher expenditures.
In a study by the Resolution Foundation, ‘JAMs’ are described as:
· In a family where there is at least one working income
· The earner(s) are probably full time
· Income is up to £50,000, but the costs of several children are challenging
· Income may be topped up by benefits
· You may have owned a home in the past, but now are likely to rent
· Your savings add up to less than a month’s wages.
Budgeting can be a bit of a dark art in that it is difficult to predict what exactly will happen in the future, but unexpected expenses should always be included in a well-constructed budget. It is often the case that people will live on the money they have and react when it runs out, but that is a recipe for disaster when there are many costs that do not occur every month but might appear every few months, annually or perhaps larger costs every 2-3 years. The survey lists some of the ‘unexpected expenses’ mentioned by the respondents: replacement of kitchen appliances, a broken window, car repairs, pet bills, Christmas costs and leisure. All of these can be accounted for in a budget that includes saving for future costs.
It is unfortunate that structured budgeting help is often only received when families reach a breaking point and are having to deal with their debts through a formal debt solution such as an IVA or bankruptcy. Every family should try to set out a budget which includes saving for the unexpected costs so they can avoid getting into a JAM.