The biggest financial challenges of 2023

Details of a woman counting money to pay.  Finance

2022 has affected our finances, but what does 2023 hold? Photo: Getty

last year It affected our financesAnd while the worst of the stress is over, we’ll still be feeling the pain well into 2023.

The latest version of the Hargreaves Lansdowne (HL) Savings and Resilience Scale found that: High inflation Leaving millions of people running empty by the end of 2022, there’s still a long way to go.

For low-income people, the young and single, this can do serious damage to their financial resilience – both in the present and in the long term as well.

The Barometer is a piece of analysis that HL performs in partnership with Oxford Economics every six months, and collects 16 separate metrics from official data sets, and uses statistical modeling to build a picture of individuals’ overall financial resilience. It can help us see where we stand now, and what the coming year holds.

Read more: New Fiscal Year Resolutions: How to Plan Your Finances for 2023

The results bring us the good news: We may be over the worst of stress.

The number of people suffering from price hikes was nearly two in five at the end of 2022, and this is expected to gradually decrease to just under a quarter by the end of this year.

Unfortunately, the damage was done, as many spent their accumulated savings and debts. Our financial resilience has decreased significantly in the past six months, and we have taken away three-fifths of the support we have had over the years pandemic From things like insurance savings.

LONDON, UNITED KINGDOM - NOVEMBER 8: A shopper at a supermarket in London, Britain, on November 08, 2022 as new research reveals that food prices are rising with inflation to a record high of around 15 percent.  According to Kantar, prices of groceries, food, and beverages have increased and are set to continue to rise as the cost of living crisis continues.  Kantar found that more than a quarter of households are struggling financially - twice as many as this time last year.  (Photo by Diendra Haria/Anadolu Agency via Getty Images)

Low-income earners were the hardest hit, as they spend a larger portion of their earnings on necessities. Photo: Dinendra Haria/Anadolu Agency via Getty

But the pressure was not felt evenly. Low-income earners were hardest hit, because they spent a larger portion of their earnings on necessities – the price of which rose at twice the rate of non-essential goods.

Overall, less than a third (30%) of households will be affected by their money due to a loss Rising pricesBut among low-income earners this rises to nearly 80%.

To make matters worse, they are unlikely to have any remaining costs to cut, and they are unlikely to be sitting on any additional savings accumulated during the pandemic. When we get to the end of 2022, lower-than-average households are actually in a worse savings position than they were before the pandemic hit. For those with no savings left, it raises the risk that this year will see more low-income people take on unsustainable levels of debt.

Read more: Money: What to expect in 2023

But while low-income earners are bearing the brunt, those on middle-income are starting to feel the pinch as well, with nearly a third experiencing poor resilience levels. Changes in the real estate market will also affect homeowners in this group. Those who need to remortgage this year face doing so at significantly higher interest rates, which will wreak havoc on both savings and debt.

Lower housing prices will also affect, although their severity will depend only on How quickly prices fall.

Not only will it affect people’s confidence and immediate financial situation, but it will also hurt their long-term plans, and scores for being on track for a moderate retirement income will drop more for homeowners than for renters.

This decline is especially striking among Gen Z and Millennial homeowners, who tend to borrow more to buy when home prices are higher and will therefore be more affected.

Those who need to remortgage this year face doing so at significantly higher interest rates, which will wreak havoc on both savings and debt.  Photo: Getty

Those who need to remortgage this year face doing so at significantly higher interest rates, which will wreak havoc on both savings and debt. Photo: Getty

There were also lower flexibility scores for single people – with or without children – who have to increase their individual income. Only 13% of single-member households without children have very good financial resilience compared to 41% of childless couples.

Some details in the scale also show that people who make financial decisions with their partners tend to be more resilient than those who make decisions alone, so having a sounding board seems to help people find solutions in difficult times.

Millions of us have had a tough 2022, and a tough 2023 is set to be, but it looks like we have a better chance of getting through it in one piece if we can do it together.

Watch: How to prevent getting into debt

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