Saving Makes You Feel Good
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.
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Credit Crunch Means Longer Working Hours
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.”
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Save £500 and Get Healthy
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.
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Vain Brits are Biggest Spenders in Europe
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.”
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Debt in Retirement Increases
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.
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Personal Debt Exceeds Income
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.”
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Mortgage Approval Drops 65%
The number of mortgage approvals has declined by 65% over the past year, with July figures almost matching the record low in June. The British Bankers’ Association (BBA) said the number of mortgages approved in July totalled 22,448, which represents a 10 year low of the value of mortgages approved at £3.2 billion.
The number of remortgage deals which are going through is down 21%, but this still makes up for half of all mortgage activity as more people are wishing to consolidate their debt with a remortgage.
BBA statistics director David Dooks said: “The monthly numbers of approvals for house purchases, which have fallen by some two-thirds over the last year, levelled off in July.”
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Disposable Income leaves Families in Debt
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.”
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Brits Pay an extra £350 for Petrol
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.”
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Bank Online for better Debt Management
One way for better debt management is to do your banking online so that you can keep a stricter eye one your incomings and outgoings.
According to the Association of Payment Clearing Services (Apacs), online banking is the best way to keep an eye on your accounts which may mean that you find yourself stricter with your spending habits, especially if you are on a budget.
Online banking has become a popular way to manage debt as it offers you easy access to your current account. There has been a 505% increase during the last seven years, with 1 in 2 adults now using online banking services.
Apacs spokesperson Michelle Mayer said: “I think what it will do is give people an exact picture of where they stand, which is always a good thing if you are trying to manage your budget. Having access to your finances whenever you want and seeing what is going in and coming out puts you in a good place.
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Are comparison websties offering the best deals?
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.
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‘Bank of Sons and Daughters’ to Rise
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.”
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More Brits are “over-indebted”
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.
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Katona Declared Bankrupt
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.
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Debt Help Needed for Renters
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.”
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Brits are “Getting by” with Debt
The effects of the credit crunch are seeping into our everyday lives, but Brits are keeping a cool head as more people describe themselves as “getting by” with their finances.
According to the latest research by Mintel, the number of consumers who would describe their financial situation as comfortable or managing easily has slipped from 64% to 51% over the space of a couple of years.
The proportion of those who need help to manage debt as they are struggling with their financial commitments has doubled to 4%, as more Brits admit that they have missed financial payments recently.
Senior finance analyst at Mintel, Toby Clark, comments that: “The good news is that the vast majority of people can still afford to make ends meet. But there has clearly been a deterioration in people’s perception of their financial situation over the past two years.”
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Debt Knowledge in Decline
People know less about debt and personal finance information than ever before, according to new GCSE style exams. Research by Abbey Banking, which asked a selected group of British adults to take part in a financial matters exam, report that our overall financial knowledge has declined over the past year even though more people should be seeking debt advice due to the current economy.
1 in 7 of the examinees failed to score 40%, which is needed for a GCSE grade C. This time last year, it was only one in 10 who failed to get a C. The number of A grade financial savvy individuals has also fallen, from 30% to 28%.
Steve Shore, Abbey Banking’s director, commented: “Quite worrying given that the credit crunch and cost of living has dominated the front pages for the past 12 months - and people say that they are more interested in understanding their finance than ever before.”
25% were unaware that taking out a secured loan would be securing debts against the home, meaning that there is a risk that the property could be lost to the creditors if the debtor failed to make the necessary secured loan payments.
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British Debt Map
Everyone seems to be struggling with debt levels and new research shows where in Britain the highest average amounts of unsecured debt lies. Information published by the Mail on Sunday shows that the South-East is the top indebted region, and those who have sought some form of debt advice have almost £27,000 worth of unsecured debt.
Residents of London are facing the highest levels of debt as the average borrower owes over £41,000, according to this research. Those who are closest to being debt free are residents of Orkney who owe just over £4,000.
The Top 5 most indebted places, with details about average debt levels are:
1: City of London - £41,002
2: Salisbury, Wiltshire - £39,474
3: Isle of Man - £36,538
4: Dorchester, Dorset - £35,939
5: Manchester - £32,932
It is likely that people living in the City are racking up high levels of debt as they are on higher incomes and thought that they could manage. However the lack of disposable income due to the credit crunch and rising costs of living means that more and more people are facing debt problems.
Are you Struggling with Debt?
If you think that your financial situation wouldn’t look out of place on the debt map, then maybe it is time that you took some debt advice. One Advice can offer you free debt advice and information so, no matter what your level of debt, we are confident that we can find a debt solution which is right for your financial circumstances.
For free debt advice, call our One Advice debt advisors on 0800 019 5870 or take the 1 Minute Debt Test.
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Credit Crunch Hits Weekend Fun
Not only have takeaways become the victim of the credit crunch, but it seems as though more cash-strapped Brits are spending their Saturday nights at home as their disposable income is on the decrease.
According to a new survey by Halifax Home Insurance, 60% of those polled now spend Saturdays nights at home with friends and family rather then go out to restaurants or for an evening at the local pubs and clubs.
84% have admitted that the change in weekend spending habits is due to an active effort to try to manage debt levels as they struggle against the credit crunch and soaring household bills. Many are willing to share debt free tips as 73% said they plan to share money-saving ideas with friends and family.
Paul Birkhead, of Halifax Home Insurance, said: “They say Brits are at their best when times are challenging, and our research clearly shows we’re being resourceful in watching the pennies while looking to have a good time - and it’s bringing people together.”
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Credit Crunch Hits Takeaways
It seems as though nothing is safe from the credit crunch, and takeaway treats have become it’s newest victim. Sainsbury’s have discovered that 1 in 6 people have stopped ordering takeaways altogether, and 37% have cut down on how many the buy.
In replacement is the ‘fakeway’, as the supermarket reports a rise in the number of people who are purchasing key curry ingredients, such as poppadoms, coconut milk and Peshwari naans.
Alison Austin, head of sustainability at Sainsbury’s said: “Fakeaways are here to stay. “They’re created for a fraction of the cost of traditional takeaways.”
In order to combat debt, people are shunning expensive work lunch breaks and are taking their own butties instead, as the sale of plastic lunch boxes has increased by a quarter.
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Repossession Risks Increase by 24%
The number of homes threatened with repossession in England and Wales has jumped by 24%. According to the Ministry of Justice, this figure now stands at 28,568 in the second quarter of 2008. This figure has rose by 4% from the first quarter of the year, suggesting that there is an increase in the number of homeowners who need help to manage debt.
Mortgage possession claims, which is the first stage of the repossession process, has grown 17% from the same period last year. These figures show a worrying trend which can be seen as a result of the credit crunch, as fixed term mortgages have come to an end and have been replaced with more expensive mortgage deals.
Although not everyone of these petitions will end in repossession, the Council of Mortgage Lenders (CML) report that 18,900 homes has been repossessed during the first 6 months of the year, the highest figure in 12 years. They also predict a 50% rise in repossessions this year, which could mean that 45,000 borrowers would lose their homes.
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Credit Crunch Debt “Knocked on the front Door”
The credit crunch onset seemed to happen almost overnight, which has left many Brits with no time to change their spending habits and get help to manage debt. Moneyfacts Darren Cook, head of Public Relations, said that the credit crunch has “knocked on the front door and actually affected the consumer”.
If the credit crunch happened at a much slower rate, they believe that many people would have financially reacted to the change in circumstances, meaning that many would be able to deal with their debt and not have to worry as much about financial issues being a top concern.
Cook added that “If that change had happened gradually in 12 to 24 months then people would have been able to adapt their household expenses. It’s gone from one extreme to another and it’s caught people out.”
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One Advice Guide to Inflation
Inflation has become a hot news topic of late, with the UK annual rate of inflation being at its highest since records began in 1997. In July 2008, inflation rate rose to 4.4%, which is more than twice the Government’s target.
Inflation figures generally represent the overall effect of prices, some will go up and some will go down. Not everyone understands what inflation is or what it does to your finances, savings and cost of living. This is who the One Advice Guide to Inflation is designed for. It will give you a quick overview of the essential things that you need to know about inflation.
What is Inflation?
Inflation is the general increase of prices across the economy which is otherwise known as the “cost of living”. The definition of inflation is: “a general increase in prices and fall in the purchasing value of money”, effectively meaning that your money won’t buy you as much today as it did yesterday.
In the UK, the rate of inflation is most commonly identified by the Retail Prices Index which is published every month by the National Statistics Office. It is the measure of change in prices for typical household goods and services, in comparison to the year before.
Causes of Inflation
The causes of inflation are not crystal clear, and many economists are not in agreement about what causes inflation. Generally, the causes of inflation are seen as:
- Too much demand for too few goods/services, which means that higher prices can be commanded.
- Pay rises can lead to companies increasing the prices of their products.
Types of Inflation
There are different ways that inflation can be calculated, so there are a number of interest rate types which you should be aware of:
- Retail Price Index (RPI) – This known as the headline rate and includes the cost of mortgage inflation rates. It is likely to be the one that you have mostly heard of as it is commonly quoted in the media.
- Retail Prices Index minus mortgage interest payments (RPIX) – This interest rate is preferred by the Treasury. It excludes mortgage interest rates which are set by the Bank of England, so it is believed to be a purer measure of actual prices trends.
- Retail Prices Index minus mortgage interest payments and taxation (RPIY) – This is preferred by the Bank of England and best shows the core inflation rate.
Consequences of Inflation
Inflation affects different people in different ways…
Imagine that you have seen an mp3 player which costs £100, you could either borrow the money or you could save up over a year. If the inflation rate is at 3%, this is how it would work:
Borrower: You have decided that you want this must have item right away and agree to borrow at 15% interest rate over a year. You will have paid £115 for the item when it is only worth £100. With a rate of inflation at 3%, the mp3 player will not be worth this much for another 5 years.
Saver: You have decided to save £100 in a bank which can offer you a 10% interest rate, so you will have £110 in the bank. Due to the 3% inflation rate, the mp3 player will now cost you £103 but you have accumulated additonal interest on what has been saved.
So if you are struggling with money already, and the cost of items are going up but your wages are staying the same, you might need help to manage debt. This is where One Advice come in, we can offer you access to a number of the leading debt solutions which aim to reduce your outgoings to your unsecured debt.
For free advice about a range of debt solutions, call One Advice free on {Phone Number} or take the 1 minute debt test.
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Negative Equity may cause Divorce Rate Decline
Credit crunch financial woes, debt problems and equity worries means that the number of divorces in the UK could potentially fall, according to Consilium Financial Planning Ltd.
Managing director, Kevin Morgan said that the problem would be that “equity” in a marriage is property which becomes a problem if there is negative equity in the home and this would lead to a drop in divorce rates because “If it can’t be sold, it’s substantially more difficult to release funds.”
According to the Office for National Statistics, the divorce rate is now at its lowest since 1984, and this figure could drop even lower as more couples try to work through their differences as remortgaging their home becomes almost an impossibility.
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Debt Defaults are on the Increase
Record numbers of UK consumers are defaulting of their debt, which can be viewed as a direct consequence of the credit crunch. The number of ‘charge offs’ (debts overdue by more than 180 days) has risen 3% since March, according to research by credit agency Standard & Poor (S&P).
Borrowers are being pushed beyond their means as livings costs are becoming more unaffordable, leading many to seek additional help to manage debt. Before the credit crunch became such a financial worry, the number of charge offs had been declining over the past three years due to more people opting to manage their debt through an Individual Voluntary Arrangement (IVA).
Help with Default Debt
If you have been missing payments then you might have been issued a default notice by your creditors. This is a letter to tell you that you are not up to date with your debt repayments and you are in default of your credit agreement. This could lead onto a CCJ (County Court Judgement) and if the defaulted debt is a mortgage or a secured loan then your home could be at risk of repossession.
But it is never too late to regain control of your financial situation. If you are struggling with your debt and you are worrying that you might default on your debt, please see if One Advice can help. We have specialist debt advisors who will help you find the debt solution which is right for your circumstances.
Take the One Advice 1 Minute Debt Test to see if you can become debt free in as little as 60 months with an IVA.