£27,373 a year for families to 'break even'

The average British family now needs to bring home £27,373.20 a year - just to break even, according to a new study. The figure is an increase of £2,571.69 or 10% on last year's cost of living, which came in at an already staggering £24,801.51.

Researchers considered the money families need to fork out on essential expenditure such as mortgage or rent payments, utilities, food, insurance, loans and motoring.

The study found families are spending much more on food shopping, commuting to work, petrol and paying off debts this year than they did in 2012.

Indeed, the biggest cost is the weekly food shop, which now sets people back an incredible £5,077.28 a year - an increase of £586.04 or 13% since last year, up to an average of almost £100 per week.

Payments for mortgages and rent were the second highest outlay, totalling £4,723.92 annually, which is a rise of £209.04 or 5% to an average of almost £400.

While many Brits have suffered with the rise in petrol prices, paying out £2,964.52 this year compared to £2,667.60 last year, an increase of 11%.

Andrew Barker, managing director for the mutually-owned financial adviser Skipton Financial Services, which conducted the study of 2,000 adults with at least two children living at home, said:

"This year's research shows there has been no respite for British families over the with the average family spending 10% more than this time last year, meaning they are having to bring home over £27,000 just to break even.

"This report doesn't include any disposable income, which means unplanned shopping trips, takeaways, restaurants meals, entertainment at the weekends and holidays are all added extras.

"It is easy to understand why the large majority of Brits are so cash strapped, as their average wage needs to be significant to cope with their annual costs.

"Over the past year, living costs have continued to rise above the average rate of pay with many public sector workers, for example NHS staff, having a pay freeze.

"Don't forget that £27,373.20 is the figure UK families need to bring home so, once income tax and national insurance has been taken into account, a basic rate taxpayer would actually have to earn over £36,000."

The study indicates there have been some significant rises in spending, most notably where people are trying hard to pay off debts.

Indeed, research shows this year the average family paid off credit and store cards, as well as loans, to the tune of £3,313.68.

Last year the figure for debts reached £2,906.16 which means Brits are have had to find an additional £407.52 or 14% to fund their spending habits.

Utilities are costing families more than ever, with the average home now shelling out £561.68 annually for gas, £554.48 for electricity and £398.12 for water - collectively that's an increase of £231.36 or 18% across the past 12 months.

And people are spending more than ever on services such as internet, mobile phone contracts and insurance.

In fact, across 2013, the ONLY decrease in spending applies to television, cable and sky services, which came in at £648.18, which is £5.40 LESS than last year.

Andrew Barker continues:

"This is the third year we have carried out this research. In 2011, we knew families were feeling the pinch, with inflation riding high at 5% and savings accounts paying rock-bottom rates.

"However two years on, whilst inflation felt in November to 2.2%, it has now been above the Government's 2% target for almost four years. This has meant living costs have now been uncomfortably high for a sustained period, coupled with the fact that UK interest rates have been at 0.5% now since 2009.

"It is worrying that a third of those surveyed do not have a savings account, with 60% of those only managing to save £50 or less each month. Even if they have, basic rate taxpayers need a rate of 2.75% before tax to match inflation, while higher rate taxpayers need 3.67%.

"The best that basic rate payers can do on easy-access accounts is 1.60% before tax and even if you tie up your money for five years, the net returns are extremely poor for basic rate taxpayers, as the best you can do is 3.20% before tax.

"Utility bill price rises have been in the news in recent months with four of the big six energy providers - npower, Scottish Power, SSE and British Gas - announcing an inflation-busting average price rise of 9.1%. This year's study found that the average family is now paying well over £1,100 for their gas and electric.

"It seems that there is no end to the misery for UK families, with two thirds expecting to pay even more on bills next year and over half expecting to have less disposable income. Only one in ten can see short-term respite and expect to be less cash strapped in 2014."

Researchers found that while 54% of people try to budget for their monthly spending, a third struggle to pay for everything and a third of those polled always go into their overdraft by at least five hundred pounds. A fifth go into their overdraft by £1,000 or over with 44% using their overdraft more than last year.

But two thirds of families do have some form of saving account, putting away £84.07 a month. However 60% save £50 or less each month and one third have no savings account at all.

Two thirds of Brits say they are paying more in bills this year than last, with the same percentage expecting outlay on bills to be even higher next year than this.

Over half have less disposable income this year than last with half expecting to have even less disposable income in 2014.

Only 11% expect to be less cash strapped next year than they are now, with just under half of those polled expecting to be more cash strapped in 2014.

AVERAGE UK FAMILY'S ANNUAL COSTS