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Can you feel it yet?

b_200_0_16777215_00_images_stories_mercado_Mar_2012_survey_1.gifCombined effect of lower inflation,  falling cost of utilities and food is helping household budgets.

British families could be in for an easier financial ride in the months ahead as spending power increases, and inflation drops - though the economy is expected to dip in and out of growth.

“Perhaps the combined effect of lower inflation and the costs of utilities and food starting to fall is producing some green shoots of recovery in household finances,” said Mark Gregory, Legal & General Executive Director Savings.

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Legal & General’s latest MoneyMood Survey shows household finances may be a little stronger at the start of 2012 compared to the end of last year. It showed the number of households who say they’re “struggling” to pay bills or sinking into debt has fallen by just under a quarter of a million (244,000) at the start of the year compared to the last quarter of 2011. And the number of “surviving” households, where income covers bills and debt, has gone up by almost 1.47m.

News that the UK inflation rate dropped to 3.6% in January is also welcome news for households - and predictions by the Bank of England are for it to shrink to 1.8% by 2014. A combination of historically low interest rates and high inflation has hit UK savers, though borrowers have benefited.

However, relief will be gradual in the face of high unemployment of 8.4%, stagnant wages and economic uncertainty.

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“The fiscal consolidation and tight credit conditions at home and the weakness of our major overseas trading partners are acting as a drag on growth,”said Bank of England Governor Sir Mervyn King.

And for those families who are struggling, some in London face a shortfall of up to 261 per month. Legal & General said families who are most needy are in the W Midlands and Scotland - reflecting, perhaps, the impact of job losses.

George Osborne will unveil his budget on March 21 and some experts predict it will be the wealthy who are hit, with wealthy savers being advised to maximise their pension contributions.But with little cash in state coffers, he is unlikely to offer much support for British families.  The budget is the time when a chancellor updates Parliament and the nation on the state of the economy, public finances and any progress in terms of economic objectives. They can review and change tax rates, and make announcements on how taxpayer money will be spent.

If you are struggling with budgeting, here are some top Money Market tips to help:

1. Check your bank statement

It’s so easy to open your bank statement, give it a quick glance and then pop it in the drawer with all the others, but when was the last time you checked your statement carefully?

Do you know what all those insurance payments are for, and are you still shelling out for gym membership you hardly ever use?

2. Complete a budget planner

If you want to know where your money is going every month, complete a full list of all your expenditure and then look at each item in turn and ask yourself two questions for each – do i need to pay this and can i get a cheaper deal?

3. Is your flexible friend up to scratch?

Long term 0% credit cards, whether for balance transfers or new purchases are a simple yet effective way of making your money go a little further – isn’t it time you took advantage of interest free deals?

4. Getting the best deal for your savings?

Even though savings rates are historically low at the moment, it doesn’t mean you shouldn’t keep an eye on interest rates. With many accounts paying just 0.1%, you can easily earn 30 times that amount with a best buy easy access account – so what are you waiting for?

5. Time to review your mortgage

For many people it’s the monthly mortgage standing order that takes the largest slice out of the monthly budget; however it also represents an opportunity to save a decent amount on your repayments if you take a little time to shop around..

By Julia M. Thompson

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