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Some Ways To Cut Down On Debt
By Geoff Cummings
Just like other countries around the world here in the UK many more people are facing tough times financially. The British government is trying to redress the balance after the massive bank bailouts of recent years. This has resulted in pension ages rising, the cutting of certain benefits, public sector redundancies, and tax increases such as VAT and income tax. From April of 2011 around 750,000 taxpayers will pay the higher rate of income tax at 40% as they fall into the upper tax bracket, so even the middle class are affected. Inevitably, the consequences of these tough austerity measures has meant more people getting into bad debt. And, to make matters worse, hundreds of debt advisers face redundancy after the government has announced it will no longer fund about 500 specialists in England and Wales who currently offer free advice to those in debt. This is part of its own cost cutting programme. So, it is up to every person to think about ways they can help themselves before their debts get too serious and they face such things as Individual Voluntary Arrangements, or worse still - bankruptcy. One way to cut debt is by paying off balances on credit cards every month, rather than keeping a running outstanding balance which often attracts a big rate of interest. If possible get hold of a credit card which gives an interest-free rate for a balance transfer for a period of time, ideally over 12 months or even longer. If you can do without a credit card better still of course, that way the temptation to spend what you haven't got is not there. Having spare cash for something planned in the future, or set aside for an emergency, is very useful. But, if you are in the fortunate position of having such a sum in a savings account, consider using any money over and above this to pay off debts which attract interest. So, if for example you have a spare £5,000 and you have a credit card with a similar amount on which you pay monthly interest on, it makes more sense to pay that balance off rather than earning a meagre 1% or so interest on it sat in a deposit account. Also, look for ways you could use a lump sum to save money, such as by buying season tickets where you can get discounts, or paying for your car insurance in a lump sum instead of over 12 months which usually attracts interest charges. Bottom line is, savings rates are very low right now, so you need to make your money work for hard for you. With an anticipated extra 200,000 requests for free debt advice this coming year there will be more strain on Citizens Advice Bureaux. I expect we will see many more bankruptcies as the tax rises, cuts in welfare, and cuts in public sector jobs, begin to bite. |
Is Bankruptcy the Solution?
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It is unfortunate that the government, like the population at large, become blasé about debt. So often I see a short term patch being used to stem a long term haemorrhage.
If you are already in debt, stop borrowing! It is not easy but do without what you cannot afford and find the cheapest source of what you need (ie. essentials!)
None of the actions by the government to redress the national solvency problem is a serious long term solution.
CONTRIBUTOR'S REPLY
Thanks Arthur, agreed, it's a bit like putting sticking plasters over huge gashes. Unfortunately, borrowing can so easily become a cycle hard to get out of.
Thank you for sharing this valuable information, Geoff.
When I bought my first home, in 1955, you needed 20% down, or the bank wouldn't talk to you.Also, only the main wage earner was considered for repayment of the loan.
One of the worst things that has happened since then, is letting our people over extend themselves with credit.
Keep up the good work.
Best wishes.
Frederick
CONTRIBUTOR'S REPLY
Thanks Frederick. Yes, banks got ino the terrible mess partly because of lending without thinking about it, and it's so easy nowadays for there to be negative equity in properties because so little went into the purchase by way of deposits.
Thank you Geoff. 5* intel. My dad was a great help to us, his children. We were taught at a very early age to plan to always have something left over from our expenditures. We had to work hard for our pennies. We picked fruit for the farmers in our valley in the summer and did odd jobs for neighbours in the winter. We learned never to spend more than we made. Guess everyone should have had dad as a teacher.
CONTRIBUTOR'S REPLY
Thanks Laraine, unfortunately we now live in the 'buy now, pay later' society which almost encourages debt. Many who go to university in fact start off with debts once they leave.
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