In the first half of 2008, Personal finance has hit the “worst ever level” for 11 years, according to the Financial Reality Index from the Alliance Trust Research Centre. These problems could lead many more people seeking additional debt advice due to a fall in disposable income and a rise in prices across the board due, in part, to the credit crunch.

The changes in financial circumstances are hitting many households who are actively cutting back on spending to avoid debt. This trend is expected to continue as outgoings, such as mortgage repayments and fuel bills, are steadily increasing.

Shona Dobbie, head of the Alliance Trust Research Centre, said: “”Our latest report highlights that consumers are starting to feel the pinch of financial reality, and are showing signs of reining in spending. Our measure of consumer wellbeing shows households are facing increased headwinds in terms of their finances, as food and energy prices move higher, house price growth slows and equity markets decline. These combined factors give us a bleak view of consumer spending and confidence for the next 12 months.”