The Biggest Challenges People Face Managing Personal Finances in the UK

Thus, it’s one of the biggest challenges people face in the UK when trying to stay on top of their finances.

If you’ve ever felt that your finances are running you rather than the other way round, you’re certainly not alone.

Here are some of the most common problems people face managing personal finance in the UK, along with practical ways to overcome them.

1. The Cost of Living Crisis

The biggest pressure facing most households today is the cost of living.

Energy bills, food prices, and housing costs have all increased sharply over the past few years. Even those on good incomes are finding that their money doesn’t go as far as it used to.

How to manage it:

• Review your spending regularly. Small recurring costs (like subscriptions) can quietly eat into your budget.
  • Shop smarter. Utilise cashback apps and loyalty schemes to maximise your returns from everyday spending.
  • Build an emergency fund. Even a small cushion gives you breathing space when prices fluctuate.

2. Lack of Financial Education

Many people in the UK admit they were never really taught how to manage money, budgeting, saving, investing, or understanding credit are often learned the hard way. This significantly contributes to the broader issues of managing personal finances.

Without that foundation, it’s easy to make financial decisions based on guesswork or short-term thinking and face challenges that people encounter in the UK.

How to manage it:

• • Start small. Learning about basic money management, budgeting tools, ISAs, and compound interest is a great starting point.
  • Seek professional advice. Speaking with a qualified financial adviser can help you plan properly for your goals.
  • Use trusted sources. The MoneyHelper website and Citizens Advice offer free guidance on common money topics.

3. Living on Credit

Credit cards, buy-now-pay-later schemes, and personal loans are now part of everyday life.

While credit can be helpful, it’s easy to become reliant on it, especially when incomes are stretched. Over time, this can create a vicious cycle that contributes to problems in managing personal finances, leading to increased debt and stress, which are challenges people face in the UK.

How to manage it:

• • Track your debts. Know exactly what you owe and at what interest rate.
  • Prioritise high-interest debt. Paying these off first saves you money in the long run.
  • Avoid minimum payments. Paying more than the minimum each month can make a huge difference.

4. Not Planning for the Future

Many people focus on short-term financial survival but neglect longer-term goals, such as retirement, homeownership, or their children’s education.

Without a clear plan, opportunities to grow wealth or protect your future can easily be missed. Within the UK context, this oversight can lead to major financial challenges faced by people managing personal finances.

Read about the biggest challenges facing savers in 2025

How to manage it:

• • Set clear goals. Whether it’s buying a home, retiring early, or building savings, clarity helps focus your spending.
  • Make the most of your pension. Employer contributions and tax relief can make a big difference over time.
  • Review your plan regularly. Life changes, your financial plan should evolve too.

5. Emotional Spending and Money Stress

Finally, money isn’t just about numbers; it’s emotional.

Many people spend impulsively to feel better or avoid looking at their finances because it causes anxiety.

These habits can quickly compound any existing problems with managing personal finances, undoing even the best-laid plans. Emotional spending further adds to the biggest challenges faced in managing personal finances in the region.

How to manage it:

• • Create mindful spending habits. Ask yourself if a purchase aligns with your goals.
  • Automate savings. Paying yourself first makes saving effortless.
  • Talk about money. Sharing your worries with a trusted adviser or friend can help relieve the pressure.

Final Thoughts

Managing personal finances in the UK can be challenging, but it is not impossible.