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The Post Office has published its 5th annual Consumer Credit Report, which suggests that more than 12 million people will be using credit cards to pay for essential living costs this month.

This is a 2% increase from the January 2011 figures, and accounts for 36% of all credit card holders. The Post Office also found that 42% of people with credit cards plan to pay for groceries using plastic, whilst 38% expect to spend an extra £200.

10% of people relying on credit cards this month still have debts to pay off from Christmas, and 7% will be forced to pay utility bills using credit cards.

Additionally, 21% accepted they will need take better control of their finances this year if they intend to pay off their credit cards, and 6% expect their debts will leave them seriously overstretched.

Nevertheless, a third of respondents admitted planning to use credit cards to make purchases in the January sales, and nearly 25% will book a holiday on their card in an effort to beat the January blues.

If you are struggling to keep on top of credit cards and other payments, there are a number of debt management options available. Our advisors can talk you through the best solution based on your circumstances – get in touch to discuss the way forward.

Since the collapse of Northern Rock in 2007, businesses and individuals have found obtaining credit far more difficult than it was before. After the mess that was created by the sub-prime mortgage crisis in the US, banks have become a lot stricter about who they lend to, making credit less easily available.

This year, the situation may be about to get even worse, according to the Bank of England; lenders are more concerned about the eurozone now than they were about the failure of Lehman Brothers in 2008.

The crisis in the eurozone may force banks into a more cautious position, making it harder for companies and households to borrow money.

Just this week, the European Central Bank had to take steps to support banks that have been reluctant to lend to one another.

The Bank of England has warned that: “Developments in the euro area and their impact on banks’ funding conditions would be a key determinant of credit availability over the coming quarter.”

Lenders have already reported that, in the final months of 2011, demand for loans from SMEs fell sharply. Banks anticipate this trend will continue over the next few months. In the final quarter of 2011, demand for loans amongst bigger companies remained steady, but a drop is expected in 2012 Q1.

One area where credit availability may improve is mortgages, thanks to schemes which allow lenders to offer higher loan-to-value mortgages with support from house builders. If house prices fall or the economic outlook gets worse, however, this will have an impact on mortgages.

Families will suffer more than any other group as a result of changes to the tax and benefits systems, according to a report published by the Institute for Fiscal Studies (IFS) this week.

The Government began making changes to tax and benefits in January 2011, and reforms will continue until April 2014. This will include the new universal credit, which amalgamates benefits and tax credits.

– By 2015, a family with 2 children will have their annual income reduced by £1,250, the IFS claims. That’s a drop of 4.2%.

– Families with 3 children will see their incomes fall by 6.8%.

– Families without children, on the other hand, will only lose 0.9% of their income (£215).

It looks like the people that will suffer most will be families with children under the age of 5, families with more than 2 children, and unemployed single parents. This last group will lose over 12% of their annual income (£2,000 a year) on average, according to the report.

It is estimated that, by 2015-16, half a million families with children under 5 will fall into absolute poverty.

The IFS warns that whilst the universal credit makes employment more attractive for the majority of individuals, it diminishes the incentive for a second earner in a couple to get into work.

Groups such as the Family and Parenting Institute have also expressed concern that families and children are set to take the biggest hit as a result of the Government’s austerity measures.

Are you worried about changes to your tax and benefits entitlements? If you think you may encounter debt problems as a result of the reforms, get in touch for some confidential advice.

debt managementIt’s the New Year and for many people that means one thing – New Year’s resolutions. Generally when you think of New Year’s resolutions you’ll think of something health related; be it signing up to the gym or organising a healthy eating regime. However, more and more people are opting to take on resolutions that will have a positive impact on their personal finances.

In the current economic climate, it seems like a great idea for people to take action to rectify their poor financial situations and what better time to start than at the beginning of the year? Christmas is an expensive time of year for many of us, so January seems as good a time as any to start changing those bad financial habits. We’ve listed a few things that you can do in order to make a start with your financial New Year’s resolution.

First and foremost, you should consider drawing up a budget plan. Calculate exactly how much disposable cash you have after all of your essential outgoings have been deducted from your income. With this calculation in mind, you should be able to start living within your means, which is essential if you wish to avoid worsening your financial situation. At first you may find that sticking to your budget is demanding and you will have to make some sacrifices, but this will get easier over time.

If you have a bit of extra cash at the end of the month, perhaps you could put it towards paying off any debts. Don’t just stick to minimum monthly repayments if you can afford to. The quicker you can pay off your debts, the less you’ll be paying in interest and the quicker you can start earning interest on savings.

It might sound obvious but saving is the key to financial success. It is recommended that you save 10% of your income. Once you are debt-free, this can be done with little effort. The money that was being spent on repaying credit cards, loans etc. could be put into a savings account and actually earn you interest! Furthermore, you could carry out some research into investing your money, which could help your savings grow at a quicker rate.

The first port of call is to clear any outstanding debts and then you can start thinking about planning your finances for the future. If you want to clear your debts, you might want to consider a debt management plan or an IVA. Contact Money Solve today to find out more about your options.

Official figures released by the Insolvency Service show that 25- to 34-year-olds are the single biggest group using debt relief orders (DROs).

Since DROs were introduced in April 2009, 44,000 have been granted in England and Wales, with 1 in 4 of those resorting to a DRO aged between 25 and 34.

If you have debts of up to £15,000 and are struggling to make the payments, have no more than £50 disposable monthly income, have savings and assets of less than £300, and don’t own your own home, a DRO enables you to write off your debts.

The figures show the extent to which young people are suffering in the current economic climate, and it has been suggested that increasing student debt could make the situation worse. Student loans aren’t covered by DROs, but they are often a contributing factor when a young person becomes insolvent.

According to Joanna Elson, chief executive of the Money Advice Trust, financial realities don’t match up with the expectations many 25- to 34-year-olds grew up with – “at the same age their parents would most likely have bought their first home, have a comfortable pension lined up, and be saving for the future. For today’s 25-34 year-olds the picture is much bleaker,” she said.

The Insolvency Service’s figures indicate that, over the last 2 years, 1 in 3 people under 25 who were granted a DRO owed less than £5,000, whilst other age groups tended to owe more. 40% of those aged over 25 owed between £10,000 and £15,000.

Susan Evans, a 57-year-old mother from Talke Pits, Staffordshire, has been jailed for 28 months after stealing £115,000 from her employer.

After joining PSB Group Ltd – a manufacturing firm based in Tunstall – as a receptionist in 1998, she was promoted to the position of administration manager in 2002. She then began paying company cheques to herself and her son for nearly 4 years.

In 2008, she was dismissed for an unrelated matter, and the owner’s daughter took over the financial management of the business. It was then that Ms Evans’ crime was discovered – it became apparent that a number of invoices had been copied and changed, and the company’s bank was able to confirm who the cheques had been paid to.

From March 2004 to January 2008, Evans paid 26 cheques worth nearly £60k into her account, as well as making another 33 cheques out to her son, taking the total amount stolen to £115,411.99.

At the Stoke-on-Trent Crown Court hearing, Evans pleaded guilty to 2 charges of theft.

Her husband died in 1996, saddling her with debts of £12,000, and she never managed to get her finances back on track.

She admitted spending the stolen money on clothes, holidays, friends and family. Whilst she used some of it to pay off loans, she still has substantial debts.

She will serve no more than 14 months in prison, after which she will be released on licence.

If you are having financial difficulties, don’t let the situation get any worse. Speak to one of our experts for free debt management advice today.

New data shows that, in the run-up to Christmas, household debt has increased at the fastest rate since the beginning of the recession.

At a time when people are trying to find money for a variety of festive expenses, the jobs market has become less secure and incomes have dropped at the fastest rate for 2 years.

That more people are getting into debt, and the average amount owed is rising, is hardly surprising in this context.

Tim Moore, senior economist at financial services information firm 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.”
He added that it was likely things would deteriorate further before they improve.

The Bank of England has also published a report which indicates the majority of British households have experienced a squeeze on their finances over the last 12 months. This was presented as both a consequence of and a response to Government cuts.

Although the Centre for Economics and Business Research is forecasting a 1.7% drop in retail sales from November to December, the likes of John Lewis and Selfridges are reporting healthy year-on-year improvements.

If you wake up with a financial hangover in the New Year, our debt management experts might be able to help you find a cure. Get in touch to discuss your situation.

Money Expert added a great tool to their site recently that highlights how personal debt figures stack up around the UK.

It shows that Wales has the lowest level of average personal debts, while the South West is up there as the highest. It cites the average UK personal debt level as being £9606.52. Consumers in the South East, South West and Northern Ireland are facing average personal debts of over £10,000!

UK Debt Comparison Tool – Compare UK Debt By Region

The tool on the Money Expert site also allows you to compare the average hourly pay, property cost and RPI of the regions.

Which region are you from and does your debt stack up with the average for your region?

It’s an accepted fact that discussing debt is something of a no-go in many circles. Socially, we just don’t feel comfortable talking about our bank balances (unless, of course, they’re looking spectacularly healthy and we’re feeling like flashing the cash!).

But is debt really a taboo issue? Or are we comfortable talking credit card bills with our nearest and dearest?

We want your opinion!

Discussing Debt with Your Partner

In 2010, a study by the Post Office found that 21% of people admit to hiding debt from their partners.

What about you?

Would you discuss your debts with your partner/spouse?

Yes
No
Don't Know

Discussing Debt with Your Parents

In the very same Post Office survey, a staggering 31% of participants admitted to hiding debt from other members of their family. We presume that means parents too? Are you a regular customer at the Bank of Mum and Dad or do you prefer to keep your financial problems to yourself?

Would you discuss debt with your parents?

Yes
No
Don't Know

Discussing Debt with Your Friends

What about your friends? Can you confide in your best buddies about your personal debt problems or is that too uncomfortable a topic?

Would you discuss debt with your friends?

Yes
No
Don't Know

Leave us a Comment

Let us know what you think about discussing debt. Who would talk to about financial problems, if anyone? Do you think financial matters should be kept private? And what if your nearest and dearest wanted to talk to you about their debts. Would you feel comfortable?

Leave is a quick comment below and let us know your thoughts. Are the media overplaying the taboo around debt or are we really all keeping personal financial problems to ourselves?

It’s over to you.

New research for the Consumer Credit Counselling Service (CCCS) suggests that 5 million UK households are at risk of facing debt problems due to a lack of savings. The research, which was carried out by the Financial Inclusion Centre, found that 4.3 million households have no savings whatsoever, and a further 1.1 million have less than £1k.

As we have been reporting over recent months, the cost of living has been rising sharply, and this has made it increasingly difficult for many people to meet all of their existing financial commitments. In situations where there are no savings to draw on and wages aren’t stretching till the end of the month, people are turning to payday loans and other forms of credit to keep them afloat. Many such cases will result in people being unable to repay the additional debt they have taken on, which can cause major problems.

27% of households without savings routinely depend on credit for essential expenditure, according to the Department for Business, Innovation and Skills. By comparison, only 9% of households with £1k – £10k in savings rely on credit in this way.

The CCCS cited inadequate savings as a major reason for people getting into financial difficulties. They advise people who have no substantial savings to avoid borrowing money, especially if they are already in debt. A spokesman for the charity said: “When you are struggling financially, it can be very tempting to borrow more so that you can simply make your payments to current debts. However this practice of robbing Peter to pay Paul almost always makes a debt situation worse.”

If you are already in debt and struggling to make ends meet, you may be able to benefit from debt consolidation or another form of debt management. Our team of experts can provide confidential advice on the most suitable course of action for you.

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