Category Archives: Spending

Establishing How Bad Your Debt Problem?

Many of us complain from time to time about our finances. We complain that we cannot afford the luxuries that we would like or that something coming up is costing us too much… perhaps our bills have gone up and we are finding ourselves with less and less disposable income. To find yourself in a position where your finances feel a little tight is nothing new.

However, what if you find yourself experiencing more serious problems? Let’s say, for example, that you can’t afford to pay your bills or meet your monthly financial commitments. What if your mortgage is out of reach for your and credit cards and loan repayments are stacking up unpaid? Does this indicate a more serious debt problem?

Well, perhaps. But it is possible that your finances are tight simply because you’re spending too much on non-essentials. Before going into financial panic mode, you need to assess the severity of the situation. Back to the traditional pen and paper for this then!

You need to write down clearly everything that you earn and spend. This will be two lists. One should include details of all forms of income you receive on a monthly basis from any and all jobs you might have to income gained from other sources including benefits etc. You need a full understanding of how much money you really have each month. You should also write down your expenses, noting only the essentials such as basic food shopping bills, utilities bills and any debt or credit card repayments.

Now you need to establish whether there’s a difference between the two. If your expenses are much higher than your income there is an issue there and the next step it to assess whether it will be long term. Examples of a short term problem might be in times where you are unable to work for a couple of weeks because of illness etc. This might mean that you have temporarily have less money. If this is the case and you know that soon your situation will be rectified, personally get in touch with your creditors and see if you can get a bit of help in the short term. If it’s looking like it might be a long term issue, on the other hand, your best move would be seeking professional advice.

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Savings not loans the reality for home improvements

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Reports of a new study done by the Halifax building society puts paid to the idea that Britain is a nation of spend-now, think-tomorrow shoppers, forever borrowing to fund their lifestyle.

The annual Halifax Home Improvement Survey is part of a series of studies undertaken by the Halifax over the last 17 years. This year’s results show that only 5% of people looking to improve their home are taking out a loan to do it.

This may come as a surprise to lenders and brokers, as Home Improvements is the top reason given for taking out a loan. So are many applicants lying?

People are not obliged to use their borrowings for the purpose stated when taking out a personal loan (unless it is for specific finance, like a house or car), so it’s possible that applicants feel that they will be more likely to get the cash if they sound responsible.

The figures show that more people in the 18-34 age group were likely to take out a loan (12%) than the national average, and regional differences come into play too. Despite being the biggest savers, people in Northern Ireland were more likely to take out a loan than those living in London, who saved the least.

As many as 43% of homeowners questioned believed that their improvements would add at least £5000 to the value of their home, and a further 12% believed that the value added would be from £10,000 to £25,000. Homeowners clearly feel that they are using their savings wisely, a picture contrary to the one painted by much of today’s media.
Tony Wilcox at the Halifax commented: “This research contradicts the buy now pay later culture which is so often thought to be prevalent in the UK. The fact that the vast majority of people have saved in advance of spending is extremely encouraging. Using savings for such improvements means savers are really seeing the benefits of putting money aside.”

However, whether these figures paint an acurate picture of Britain today or just an acurate picture of those using the Halifax is another thing. There is no doubt amongst the lenders and loan brokers of Britain that the home improvement loan is as popular as ever.

Crack the Crunch by tackling bad habits

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People are making a number of fundamental errors in handling their finance according to Moneyfacts, the comparison website.

It advises people to tackle their bad finance habits in order to stay afloat during these tricky financial times.

One of the worst habits is that of living beyond your means. This fatal flaw is going to see huge numbers of UK adults sinking under unmanageable debt in coming months. People who regularly spend more than their income each month are obviously mounting up debts that they can never tackle. Many of these people will end up using credit cards to pay for basic living costs and then taking out personal loans to clear the credit cards. This is a ticking timebomb, according to MyVesta, the debt solutions provider, and they should know.

Another poor habit is allowing yourself too many credit sources. If you hold a handful of cards each with a limit of thousands there’s always the temptation to splurge. Add to this a number of catalogue accounts or store cards and suddenly all kinds of avenues are open for spending on days when your income is all gone. Moneyfacts strongly recommends paying off the cards or accounts with the highest amount of interest and limiting yourself to only a few once the balances are cleared.

Not being aware of your current financial situation is a big step in the wrong direction. Whilst few people know their exact bank balance, it is always wise to have a handle on your rough debt balance. If you haven’t tallied up all the money you owe in overdrafts, hire purchase, credit cards and loans then you’re burying your head in the sand. By being aware of what you owe you remain in control and can decide which bills need clearing most urgently.

Above all, be aware of missing payments. Many creditors see this as a green light to either slap you with a charge or raise the interest rate on your borrowings. Or both! Whilst borrowing may still be fashionable, there’s no point in spending money unnecessarily. Especially during the credit crunch!