One Advice | Bankruptcy, IVA & Debt News

When you get lured in by that must-have product which cannot wait for tomorrow, chances are you may whip out the plastic and not think about the additional cost of interest or perhaps charges for going over your credit limit?

Next time, take a moment and think, could I/should I save for the item? Not only will you avoid additional interest and charges on the debt, but it might actually make you feel good…!

According to figures published by the Yorkshire Bank, three-quarters of Brits now believe that saving up for a costly item is “more satisfying” than getting into debt by purchasing it on credit.

This could be a direct result of the credit crunch, as more people are spending less to keep an eye on their finances so they don’t struggle with debt. 73% of those polled said that they are opting to be “more careful” with their money so that they won’t need to seek debt advice later on.

The credit crunch means that Brits are working the equivalent of an extra day each week, according to new research by recruitment consultants Badenoch and Clark.

According to their figures, this is due to the employers cutting jobs or not replacing staff who decide to leave. These money saving tactics are resulting in existing employees working harder as they take on additional time-consuming responsibilities. Those between 45-54 are most likely to stretch themselves to put in extra hours, and banking and finance industries are the most affected by the crunch.

Neil Wilson, managing director of the consultants, said: “People are being asked to put in more hours in the office and that is clearly starting to take its toll. Employers who ignore the happiness of their workers leave themselves open to a mass exodus as soon as the economy picks up.”

We all want to get healthy and saving money whilst doing so seems like a great idea, as more Brits may seek debt advice as our disposable income falls and the cost of living rises. Health insurer Bupa have put together a range of tips which could reduce your debt by saving you up to £500 and offer you easy ways to become healthier.

1: Save £170 a month by stopping smoking – Cutting out cigarettes could reduce your risk of lung cancer, heart attacks and strokes. Within one month you could make a saving of £170 if you smoke 20 cigarettes a day, which could add up to £2,040 over a year! This additional money could be put to good use to pay off your high interest debt or put towards your savings.

2: Save up to £150 by cycling to work – Bupa report that our daily activity has fallen dramatically and the amount of walking or cycling done has declined by 26%. Swapping your car for a bicycle or a pair of trainers could improve your health, reduce your risk of becoming obese and save you money on petrol.

3: Drink tap water and save £50 – Although you may feel as though you can’t live without your morning latte, it could really cause damage to your finances and your waistline! By swapping to tap water you could save £50 and a whopping 3,652 calories in just one month.

4: Save £10 a month by growing your own food – Eating just two home-grown apples a day could save you more than £10 a month. And there is no need for it to stop there, seeds are cheap to buy and can offer you fresh food which is a great way to get your five-a-day.

Dr Annabel Bentley, Bupa’s assistant director, said:“Gardening is a great way to get healthy, and if you grow a range of fruit and vegetables, you can not only save yourself pounds each month on groceries, but you can also look after your heart.

5: Skip the gym for the outdoors and save £80 – Although gym memberships are a great way to get healthy, they can leave a large hole in your pocket as they can set you back up to £80 a month. Instead, swap the treadmill for the pavement and outdoor exercise.

Although we may all be battling with increasing debt and financial worries, it seems that Brits are not going to cut back on their beauty routines, as we spend more than anywhere in Europe.

According to the European Health and Beauty Retailers report, the average Brit spends £295 a year on beauty products compared with just £220 in Spain.

Report co-author Carol Ratcliffe said “The British are the biggest spenders in the EU. We spend 43% more than the average European. The British are certainly happy to splash out on looking good.”

The number of Brits who could be retiring in debt is on the increase. A study by Key Management Solutions shows that one-third of those who have released equity in their home are facing debt problems, with debt levels totally £66 billion.

A quarter of those who are struggling with finances owe almost £9,000 in unsecured debt, through credit cards, overdrafts and loans.

What makes matters worse is that more than two million pensioners are now worse off due to the credit crunch and rise in inflation. The Conservative party believe that more will have to seek debt advice as any rise in pension credit is cancelled out by inflation.

Shadow Chancellor, George Osborne, claims that inflation for pensioners is between 5.2% and 5.6%, meaning that a couple will lose £98 this year and a single pensioner £90.

Personal UK debt has outstripped the amount of income generated for a second year running. According to a report by Grant Thornton, the total amount of debt owed through mortgages, credit cards and loans rose by 7.3% throughout the year, whereas the gross domestic product (GDP) rose by only 5.1%.

Our personal debt levels now stand at £1.444 trillion which should mean that many people are beginning to question their debt management issues.

Stephen Gifford, Grant Thornton’s chief economist, said: “Despite the global downturn flattening the growth of personal debt and UK GDP over the past few quarters, debt levels continue to grow at a faster rate than the income the UK generates… the figures clearly illustrate the continuing problem of growing personal debt levels in the UK.”

The money in our pockets seems to be dwindelling, as new reports suggest that an average family’s disposable income (which is the money left over after bills and essential outgoings have been deducted) falls by £2,500, the first drop since 1997.

More and more families are going to have to seek debt advice as they struggle with their finances as the rise in living costs outstrips any additional pay rises. The study, performed by uSwitch, reports that the average British family now has a disposable income of £14,520, which is 15% less than last year. Rising bills could send more people into debt problems as they will have to find an additional £145 a month for their household bills.

The worse affected town is Newcastle which has seen disposable income levels drop by about 80%, with an average of £4,836 per household. Other badly hit areas are Glasgow, Hull, Nottingham, Blackpool and Southampton, where families are spending more than 60% of their income on essential expenses.

Ann Robinson, of uSwitch, commented: “While British athletes have been going for Gold, British consumers are going for broke. It’s been a year since the start of the credit crunch and these figures reveal the exact price being paid by British consumers.”

British drivers are paying more for filling up their vehicles than other European countries since 2000, according to a new poll by uSwtich. Spanish drivers are being charged an average of 96p per litre for their petrol, compared with last months British average of £1.19. The same is true with diesel, it is an average of £1 per litre in Spain but it rockets to £1.33 a litre in the UK.

This is surely going to be adding to debt levels, as British motorists pay an additional £350 per year for their petrol. The difference in price is largely do to the amount of tax, currently 59p of every £1 spent at the UK pumps goes to the Government.

Mark Monteiro, insurance expert at uSwitch.com, said “Although the Government has postponed the 2p rise in fuel duty until October, consumers still have a right to feel hard done by. We currently pay 7% more to fill our cars with petrol than our European neighbours, forking out an average of £1,753 a year to run our cars.”

If you are worried about your finances then one of the first places you might go to save money is a comparison website, after all what better way than to see all the choices in front of you so that you can choose the best deal.

What may be surprising to know is that comparison websites may not offer you the best deal for your financial circumstances, according to research by consumer group Which? .For example, a search on Moneysupermarket.com for a credit card with the lowest standard interest rate would show a rate of 6.9% APR, yet the lowest on GoCompare.com was 12.9% APR.

Martyn Hocking, editor of Which? Money, said: “With such an array of financial products to choose from, it can be tempting to turn to a price comparison site to do the legwork for you. But you might be very confused to find that different sites can give you vastly different quotes and often don’t give enough information for you to make an informed choice.”

The comparison sites have defended themselves as they each ask their consumers different questions to determine which product meets their financial needs the best.

We have all heard of the phrase ‘Bank of Mum and Dad‘, but reports predict there is going to be a rise in the number of ‘Bank of Sons and Daughters’ as the parents are facing financial problems later in life.

Saga claim that many British adults will have to pay for care home fees for their elderly parents or give up work entirely in order to provide home help. The cost of long-term care can cost up to £30,000 a year on average and with 47% of adults underestimating this cost, it is no wonder that many will need help to control debt.

Owain Wright, head of care funding services at Saga, said: “The cost of care is not always something people think to talk to their parents about, but it is vital to start planning as early as possible.”

Debts are becoming more difficult to handle, as the number of people who spend over half of their income to their unsecured debt payments has tripled in the past 12 months.

Callcredit, a credit reference agency, have released figures which show that more than 6% of the population are losing more than half of their monthly income to debt repayments which suggests that more debt advice is needed. The same goes for those who are spending approximately 30% of their income to their debts, this figure has doubled to 14%.

Anyone who spends more than a quarter of their salary to their unsecured debt is classed as being over-indebted, according to guidelines published by the Department of Business, Enterprise and Regulatory Reform.

Owen Roberts, head of Callcredit Check, said: “The increasing proportional spend on unsecured debt paints a concerning picture of consumer finances within the UK and this level of debt servicing would appear to be unsustainable.”

Worries about a recessions and the hindering damage of the credit crunch has left more people to worry about their financial future, as 43% believe that their financial situation is going to get worse over the next year.

Money worries aren’t just for the ‘everday’ person, and as it seems as though even fame-hungry stars should be taking debt advice too, as Queen of the Celebrity Jungle Kerry Katona has been declared bankrupt due to an unpaid tax bill.

The orginal bankruptcy petition has been declared to the Courts in January 2008, but it had been delayed in order to give the star time to pay off the full balance. Although she had reduced her tax bill from £417,000 to £82,000, this was not enough and HM Revenue and Customs (HMRC) agreed to the bankruptcy order against Ms Katona.

Financial worries when it comes to accomodation isn’t only a problem for homeowners who are facing an increase in the number of house repossessions , as the number of renters who are facing arrears is on the increase across the UK.

13% of renters have fallen behind in their payments, and over half of these (7% ) who were questioned for an Axa survey said that they have gone into rent arrears during the past three months alone. This signifies that the credit crunch combined with the rise in cost of living means that more people need debt help.

Over a third of those who are renting say that they do so as they are unable to get accepted for a mortgage.

Any problems with debt could be passed onto the buy-to-let owners, as 95% of renters said that they were not protected against a sudden loss in earnings, such as if they were made redundant.

Axa managing director, Mike Keating, commented: “The cost of living is rising rapidly and average earnings are not keeping pace. It’s going to continue to be tough for many tenants.”