The average household is now 15 per cent worse off than it was five years ago, according to a study by Ernst & Young.
In 2003 the average household would have £909.84 of income left over each month, compared to £772.79 in 2008.
Its Annual Discretionary Income Study found that after tax and household bills were subtracted, the typical family had less than 20 per cent of the gross income left, down from 28 per cent in 2003.
Their predictions also hinted that things may deteriorate even further, due to rising fuel and energy prices.
Ernst & Young’s Jason Gordon says: “Many UK consumer segments are clearly feeling the pinch as big rises in household costs are far outstripping relatively modest wage inflation.
“The significant decline in discretionary income means consumers are no longer in a position to spend as freely as they have done in the past.
“Worryingly, though, the worst could be yet to come. If, as predicted, utility prices rise by as much as 40 per cent later this year and interest rates are increased to control rising inflation, consumers and consumer facing businesses will face even bleaker times.”
Chiltern’s Nathan Gladwell says: “This study seems to confirm what has been felt for some time – that household incomes have been taking a hammering.
“Having £130 less in your wallet each month affects most people’s spending decisions, as it’s a significant drop in available income, and some will have to resort to other available sources of credit – like credit cards or overdrafts.
“This is a bad cycle to start though, as each month it means creeping further in to the red. A better option would be to restructure finances to a more comfortable rate, with an informal arrangement, as this means that bills will still be paid but there will still be money available to cover living costs.”