A fifth of UK households have seen a drop in income over in the last quarter, according to financial services group Deloitte.
Consumers are significantly tightening their purse strings and curbing spending as unemployment, inflation and depressed wage growth decrease disposable incomes.
Loss of bonuses, reductions in overtime and increased part-time working are also cited as having a profound effect on household incomes.
These figures come from Deloitte's newly launched Consumer Tracker, a regular monitor of consumer confidence and spending habits.
Ian Stewart, chief economist at Deloitte, said that many people are feeling a "fierce squeeze on disposable income" as a result of inflation on essential goods. Half of all respondents said they were spending more on utility bills, whilst 44% were spending more on food and 37% spending more on transport costs.
In response, consumers are reigning in their spending on discretionary items such as entertainment, clothing and holidays.
Nigel Wixcey, UK head of consumer business at Deloitte, said: "Consumers are adapting their behaviour to the current economic environment by trading down, staying in and postponing the purchase of big-ticket items.
"[...]Consumers are telling us they are deliberately making fewer impulse or spontaneous purchases. People are being forced to prioritise their spending habits."
Deloitte's findings also echo those of the Markit household finance index, a monthly survey which questions 1,500 adults aged 18-64 across Great Britain. Their survey shows income from employment has dropped at its fastest pace in more than two years.
Tim Moore, senior economist at Markit, said: "December's survey rounds off a year in which the aftershocks of the recession have hit UK household finances with unprecedented force. Weak labour market conditions, ongoing austerity measures and heightened inflationary pressures all contributed to a near-record deterioration of household finances in December.
"With real incomes down around 3% since last year, households are opting to dip into savings or take on more debt in the run-up to Christmas."