Consumer Spending & Borrowing Rises – As Does Personal Debt

2015 ended with mixed news regarding borrowing for the New Year.

Figures released by the Bank of England show that in November, consumers owed lenders over £178bn on credit cards and loans. That monthly increase, just before the run up to Christmas, was the largest increase of personal debt since February 2008, and compares sharply with a rise of just £1.2bn in October. This rise in consumer credit (and debt) mirrors the High Street. Spending soared over the same period, with retail sales volumes rising by 5% in November compared to the same time in 2014.

However, the Bank of England figures means that the average household now has borrowed money or debt of £2,759 – before mortgages are taken into consideration.

Although such sales and spending is very good for the High Street (and therefore the economy), there is quite clearly an issue regarding borrowing for many households. Many in the UK might see more debt related issues if this pattern continues further into 2016.

According to Joanna Elson, Chief Executive of the Money Advice Trust (which also runs National Debtline) “these figures confirm that we do need to keep a watchful eye on the huge growth in consumer credit we are now seeing… Increased borrowing is to be expected in an economy that is recovering – but such steep rises in borrowing in recent months are a cause for concern.”

This comes amidst an unprecedented low number of households saving. ONS statistics indicate that the last quarter of 2015 saw households saving only average of 4.4% of their income. This is the equal lowest ratio the ONS has seen for 50 years. Howard Archer, the chief UK economist at IHS Global Insight stated his concern that “this will fuel concern that consumers are borrowing more and saving less to finance their spending, which is likely a consequence of relatively high consumer confidence and extended low interest rates.” Taken all together, this trend is very worrying.

If you are one of those affected by such debt, the important thing is not to worry or panic. Seek professional financial advice regarding debt: even consider approaching your Bank or Building Society for assistance. Many financial advisers agree to avoid borrowing further to pay off borrowed money; it is a essentially a vicious cycle which becomes hard to control, and harder to break. Further, every financial expert agrees to avoid at all costs payday lenders.

If in debt, remember that there are charities around that can offer financial support and assistance. Further, the leading advisory charity Citizen’s Advice at thier numerous Citizen’s Advice Bureaux nationwide, or similar agencies, can assist with managing your debt.

Whilst not worrying too much, do not be too relaxed about debt either. Manage that debt carefully, and resolutely. Some advisors suggest to select one particular debt to focus on, and put every spare pound you have towards paying that debt: such aggressive action can be helpful, and will reduce that particular debt quickly. It is very worthwhile revisiting and examining the expenses in your lifestyle, and seeing what you can cut back on to help manage that debt.

Further, once out of debt, focus on saving regularly. Most financial advisers vocally recommend saving – even if it is just a little bit regularly. That will build up- and will prevent you from falling back into debt. Above all, acknowledge that you have a problem with debt – and seek advice and help to manage that debt. That is often the first key step in tackling debt.

Although the High Street may be benefiting from consumer spending and debt – the consumer and household is definitely not. Acknowledge and tackle any debt you may have early on this New Year, to prevent it from becoming a serious problem to your finances.

Amount of Savings Protected to Fall

There have always been rules and regulations governing the protection and assurance of customers’ savings and other assets by banks. Many of those are ultimately the result of EU rules and regulations. In the UK, those rules are set to change- which could mean that savers and their savings could be at risk.

One measure, introduced after the Eurozone and financial crash of recent years, was that banks would protect and assure savings and other assets up to a value of 100,000. This measure was introduced after the 2008 banking collapse to prevent savers moving their money across national borders to follow the highest level of customer asset protection.

In the UK, the Financial Service Compensation Scheme (FSCS) is the agency responsible for implementing that EU wide rule. It exists to protect customers of banks, and other financial service providers in the event of fraud, theft, and the collapse of that particular provider. It was the near collapse of Northern Rock in 2007 that forced government and the banking sector to take steps to protect customer deposits and assets. At that time the then Labour government acted to guarantee 100% of £35,000 in customer savings, and replaced the former tiered system of protection. This was increased in the 2008 banking collapse to £50,000.

To bring the UK into line with EU requirements, and domestic financial policy, the Bank of England in 2010 increased the amount that savers would be protected and recompensed in the event of a bank going bust or similar at £85,000. That figure (again in line with EU rules) was set to be reviewed every five years.

Under review this year, the Bank of England decided recently to lower that amount of savings protection under the FSCS. The Bank cited changes in the value of the Euro in recent years has forced the Bank to alter the conversion rate used to translate euros into sterling by the FSCS. Indeed, the lower value of Euro, and following the recent market turmoil over Greece, has meant that the Bank of England recently announced that that top amount of protected savings is to fall by £10,000 to £75,000.

It is a surprise move that has attracted some degree of criticism. According to Chairman of the Treasury Select Committee, Conservative MP Andrew Tyrie, the Conservative MP, it is “absurd” that the 16% fall in the value of the euro was having such an impact on the level of protection afforded to UK savers. Stating of his intention to urge the Chancellor of the Exchequer to raise the matter with his Eurozone counterparts, Mr Tyrie stated that Mr Osborne “may need to be robust – this won’t matter a scrap to the Eurozone. Something will clearly have to be done.”

Danny Cox, a financial planner at Hargreaves Lansdown, is in agreement: “this is absolutely bonkers. Savers are already suffering rock bottom interest rates, and now to add insult to injury the safety of that cash is being undermined.”

Following the announcement, it will be implemented from 2016. As such, the Treasury is set to maintain the £85,000 level of protection until the end of 2015. The Bank of England has also started consultations aimed at tackling the consequences for those savers locked in to long-term savings products, intending to allow savers to move the excess £10,000 that will no longer be covered by the FSCS from 2016 without having to pay fees.

It is estimated that 3% of the UK population has savings that will be affected; the Treasury will make efforts to assist those who might suffer as a result of the lowered amount protected by FSCS. Further changes will be introduced to protect savings of £1m or more for six months that have been gathered or deposited for a short term period: for example saving money for a house or similar significant purchase or investment.

Amidst investor uncertainty, low interest rates, clearly now is not the right climate for savers. However, there have been some welcome measures for savers. Additionally, as any financial planner will advise, saving is always recommended and worthwhile, even if the economic claimed is against it. Savings, protected or not, are always a shrewd financial move.

Households Planning To Save Less Over 2015

Despite many households slowly and painfully seeing the benefits of a gradual economic recovery, many millions are still reluctant to save.

According to research from consumer watchdog Which?, more than a third of people surveyed plan to save less over the coming year, despite predicting that their finances will improve over the same time.

This is a worrying trend that is becoming an increasing concern. It is evident that people are saving less, at risk to themselves, their households, and the economy.

Which? Has now joined the call for a comprehensive national savings strategy. According to the consumer watchdog’s analysis of ONS data, the last ten years has seen the proportion of households regularly saving money falling form 15% to 10%, with the average amount saved per week falling to just £23. Such figures have moved Which? Executive Director Richard Lloyd to comment that ‘“Not saving enough leaves people more vulnerable to financial shocks… As the economy picks up, the government must act to develop a national savings strategy.” However, in such uncertain and gloomy times (whatever the optimistic outlook) trying to convince people often financially pressed to save is not going to be popular.

Although a very sensible measure, and greatly advised as regards personal finances, people would rather pay their bills than save. It will take a lot of convincing to increase personal savings- of public awareness, and an increase in capital per person for savings.

Further figures show that many are at least trying to save. Polls for Moneywise.co.uk. indicate that over half (56%) will prioritise their savings in 2015, with a further quarter indicting that getting out of debt was a financial priority. Only one in ten (9%) indicated that they would be starting a savings habit in earnest, with 12% stating that they would start investing for the first time.

According to moneyfacts.co.uk, in 2008, it was possible to get an instant access savings account paying 6% interest. Now that best rate is 1.5%. Interest rates on savings have fallen not just due to the Bank of England’s own low base rates (3% in 2008), but also due to the Bank’s introduction of Funding for Lending. Under the 2012 scheme, the government channelled cheap money to banks and building societies in order to stimulate the economy. According to Anna Bowes of website savingschampion.co.uk. the “introduction of Funding for Lending completely changed the savings landscape… Before that you wouldn’t expect to see a large number of savings rates cuts outside of a Bank of England base rate cut, but we have seen 2,500 rate cuts since then… Even since last January when the scheme was pared down.”

Even though interest rates and savings accounts may not be at their best, or anyway near their former peak- it is important to start saving regularly. That is often repeated advice by many financial advisers and banks. Further, even though those rates may not be overly attractive now- it is a slow and welcome start as the UK economy painfully emerges from the age of austerity.

New Online Savings Bank to Enter Financial Market

Despite the near monopoly of the big banks, and the familiar banking logos seen on the High Street, there are some smaller banks, often local ones. Indeed, regulators have given assent for several such small banks to begin trading over the recession.

Amidst a recovering economy, another such bank will open its doors in 2015. It will be a new venture into banking, particularly as regards savings. Charter Savings Bank is due to open around March time. However, it will have no branches.

Following the success of First Direct and other online banks, Charter Savings Bank will be exclusively online and over the phone. The new bank is hoping to capitalise on a surge in online banking; recent years have seen nearly 15m banking apps downloaded, with an average of 7m logins every day. Whereas 2013 saw £5.8 bn in transactions, according to the British Bankers Association (BBA), 2014 saw an average of £6.4 bn in transactions per week- nearly £1 bn in online transactions per day in the UK in 2014. In what is clearly an expanding and lucrative financial sector, Charter Savings Bank is one of several financial companies seeking to operate in the digital arena (indeed, the larger, traditional banks are also putting more effort into their online banking capability). Further, a solely online presence means less expenses and operating costs for the bank- and less hassle for customers. Customers of the new bank will not be constrained by having to go to a branch within opening hours; instead, they can bank anytime, anywhere.

Charter Savings Bank is being launched by Charter Court Financial Services (CCFS). Founded in 2008, CCFS financial operations includes home loans business Precise Mortgages. Based in Wolverhampton, CCFS specialises in mortgages, loans and securities. With its new loans based bank, CCFS will join a small number of financial institutions who have branched into this territory.

There is great optimism as regards the launch of Charter Savings Bank; it is one of several smaller banks entering the market, and effectively challenging the dominance of the large banks. As regards the new banking contender, CCFS has said of its products and services on offer that they will include a range of fixed-rate savings bonds with terms of ranging from one and five years. No interest rates for the new bank have been released yet- but the market has seen recently that five-year fixed-rate bonds are one of the highest-paying as regards savings products. Several such bonds currently offer at least 3% interest.

New bank- new logo- new financial times

New bank- new logo- new financial times

The bank’s website ( www.chartersavingsbank.co.uk ) is already operational; though at the moment it is still fairly basic, and has little information, details, or services yet. In addition to online services, there will be a UK based call centre open seven days a week. CCFS has said that the Prudential Regulation Authority has approved its application for a banking licence, and that the new bank will be covered by the Financial Services Compensation Scheme (customer deposit protection scheme for the UK banking sector, which guarantees all eligible deposits less than £85,000 in value).

Although much is uncertain and unknown about Charter Savings Bank, what is known is that it is a welcome addition to the banking sector. Further, it shows that smaller banks can operate in a UK market dominated by the big High Street banks, and that new such challengers are emerging, giving the customer more choice. Additionally, Charter Savings Bank starkly highlights the rise, wealth, and importance of online banking.

Chrsitmas: Festive Fun, Family- and Expenses

It is a well-known (but often forgotten) fact that Christmas and New Year are often the most expensive times of year.

As well as being season of good will, festive cheer, family, and general over indulgence and family time- it is also a season of increased expense all of those gifts, Christmas cards, parties, food and drink comes at a great cost- and not just financially. Although an annual occurrence, the preceding elven months make most people forget of the expenses incurred by the festive season.

After the December fun and excesses, the January bills, debts and credit cards are often as painful as the festive hangovers and over eating. December is well known for being a time of extra (and perhaps excessive?) expenses. Given that, why not financially plan, save and prepare for December? Aside from joining a gym, vowing not to drink ever again, making a load of New Year resolutions which never make it beyond February, decide to plan December 2015 nice and early (perhaps not just financially).

There are some enterprising companies that allow people to save for just that, or to get those much needed gifts later on in the year, and similar schemes. The Post Office has such an arrangement, where for as little as £2 a week, you can add to your Christmas Club account over the year. Park Christmas Club is another such scheme, where members contribute into the scheme over the year- and reap the rewards of such prudence and savings in December. Most of the major supermarkets and retailers also offer such savings schemes. It must be noted that such Christmas Club schemes are not protected by the Financial Services Compensation Scheme

One drawback of such schemes is that usually the money saved will not be available to you again until November or December- just in time for the festive season, but inconvenient if that money is needed for anything else during the year. Quite often there are penalties if the money is taken out earlier. Aside from that, and to avoid being tied to a scheme or contract which seems excellent in January, but impractical in December, why not plan ahead?

Throughout the year, set money aside in small, manageable and regular amounts. Save regularly, and force yourself to consider those December expenses (even if it is only April). Perhaps even open a savings account for that very purpose; indeed, that is beneficial as the money saved gains interest, and could be a shrewd long term savings investment, not just for Christmas.

If intending a Christmas break or vacation, start searching in summer for good deals, ideas, places and prices instead of paying a fortune for a last minute vacation. Further, book well in advance to avoid the Christmas price hikes for hotels, travel tickets, event tickets, restaurants, and similar. Travel agents, resorts and hotels often start planning and preparing for their Christmas events, getaways and deal as early as August or September. The irony is that having just got back from summer holiday, at once plans need to be made for the Christmas holiday season.

Whatever the decision, or financial planning method arrived at, it is never too early to consider and plan for the expenses of December 2015. Knowing that some of the expenses of Christmas and New Year have already been covered is useful for financial planning- and can give a great degree of peace of mind as regards household finances.

Prior to that, thoroughly enjoy and have a wonderful time over Christmas 2014.

 

The Value of Financial Planning

The old military saying goes that ‘failing to prepare is preparing to fail’. What is said when planning military operations can also easily be said of personal finances.

Although hardly exciting or thrilling, it is very important to take some time, and time studying, to effectively plan your (and your families) finances, both currently, and for the future.

If there are any young children, then it is necessary to consider future expenses, such as school related expenses, school trips, and university fees and expenses. As such, investing and saving when the children are young is vital. Scrutinising your own personal outgoings, it is often easy to spot those unnecessary expenses. Are you actually using that gym me membership that is costing around £250 per year?

It is not only simple things similar to what was just mentioned. What about the mortgage, that albatross around many homeowners’ neck? What about saving for retirement? What about all the various insurance needs, requirements, and policies? Those are but a few of the big financial question that have to be asked, and answered

Taking the time to examine and consider your and your families’ current financial status and future is time well spent. After such planning and considering, though, it is necessary to take action, such as arranging things with mortgage lenders, settling those old debts, and similar. For many, though, such matters of household and personal finance are a blur of buzzwords and half known concepts, together with a vague understanding of interest rates. Instead of trying to understand the whole array of financial matters that need to be tackled and considered, it is far better to consult a financial adviser.

Your bank should be able to make an appointment to see one. Failing that, there are many independent financial advisers out there whose sole speciality is assisting others with their domestic finances. Ask around, compare the reputation of different financial planners, and then make an appointment to see one. That could admittedly be quite expensive; but the peace of mind and having your domestic and household finances professionally settled and ordered, will make such an expense worthwhile.

Taking time to plan and settle your personal finances will be stressful, and confusing. However, it is well worth considering that life has a nasty habit of interfering with and upsetting all of the most carefully considered plans. Having your finances in order, and planned and settled, will go a long way to assisting with all of the unexpected (financial and non-financial) twists that life can throw at you.

Tips on How to Save on Family Travel

That break away with the family can sometimes be the only thing that you really look forward to – a chance to finally relax away from all of life and work distractions. Don’t let budget put you off completely – here are some tips on how to save on family travels:

Book well in advance

Prices are always influenced by demand and therefore, during peak seasons prices always increase. Nevertheless, holiday firms want to be full as early as possible and therefore, it is worth looking around for some great offers that are available to those who book in advance. It is worth noting that if you decide to book in advance, you should also take care of travel insurance at the same time because circumstances my change by the time of the break comes.

House swap

It is worth exploring this option if you want something not so expensive but at the same time exciting and new. There are a lot of home swapping websites out there designed to do just that. Usually there is no fee per booking, just an annual membership which varies between £25 and £125.

Nevertheless, this option requires a little bit more planning because things are not as easy as booking into a hotel. You need to find a household that is similar to yours in order not to face any surprises when you get there.

Do something unusual

Try to think a bit differently. For example, you could sign up to a National Trust working holiday where you will have to do important work such as forest maintenance. The cost is around £255 for a short family break while at the same time you get to do something useful in a beautiful environment. Also, explore what youth hostels have to offer because many places now offer family rooms as well.

Share with family and friends

When you share a holiday rental with friends or family, this can always bring the price down. Also, you will save on food while you are there which is another plus to this idea.

Travel at odd times

Try to book flights midweek, if possible, because less popular flights prove to be cheaper. Even in the peak summer months, flight prices are cheaper midweek.

There a many other options where you can have a great time for less, so it is worth exploring alternatives and choose the best deal for your leisure time with your family.

How to Save Money in Smart Ways

We always need to save money but we often miss out some easy ways in which we can save money in or daily lives. Instead of waiting from a payday to a payday, we need to think how to make the most of the money we have now. Thus, you can ensure that you will enjoy a more prosperous future.


 Get a cheaper holiday

Instead of paying the standard travel agent fare, you may try to browse the internet for holiday deals. Currently, there are many reputable websites that offer great deals on all types of holidays, whether it is a spa leisure weekend or a family vacation. Also, investigate budget airlines because they often save you a lot of money, or even try a last-minute bargain with lastminute.com and laterooms.com. It is both great value and great adventure!

Sell your space

You can rent so many things nowadays, varying from rooms to driveways or seat in your car. This will add up some good money to your pocket without costing you a lot of effort.

Research tax rebate

It might be the case that your tax code is wrong. If that is so, you might be entitled to receive some significant amount of money. If you have started a new job in recent times, contact HM Revenue and Customs and asked them for a revision of your tax code. Then, you might have to claim back what you may be owed so it is worth checking this out.

Have you been mis-sold PPI?

Even though you might be sick of receiving phone calls, text messages and emails that tell you you might be owed some money from mis-selling of payment protection insurance, it is still worth checking whether this is really the case. Often those messages are spam but some of us are really entitled to compensations.

No more bottled water

Bottled water falls in the category of unnecessary and expensive luxury without which we can all live. Either get some plastic bottles and fill them with tap water for your hydration on the go or invest in one of those bottles that filter your water while you drink it. This will save you a lot of unnecessary spending.

Gather your change

Do not underestimate change, just because it is change. If you get your change and bring it to the bank in exchange for cash, it might not be millions but still you will put it in better use that simply sitting around at your home.

Tips for Earning Extra Money

 Here are a few tips on how to earn some extra cash in times of need:

Get rid of the stuff you don’t need

Everyone has stuff that he does not need and instead of throwing it in the trash, you might earn some extra money from it. Think about all the DVDs, CDs, books and games that you do not really use anymore. There are websites, such as Music Magpie, WeBuyBooks, etc., which will give you cash or credit for your unnecessary items. Obviously, you will not get rich because of this but it will help you earn some easy extra cash. You can also consider listing the items separately on EBay or Amazon, even though this is a bit time-consuming. However, you are not necessarily guaranteed a sale. Other stuff that can be traded in for cash are electronics such as iPods and laptops.

Sell your space

If you have a driveway, but not a car, or enough space on your driveway for one more car, you can rent your space to other drivers. Prices start from £3 a day for parking in the not so desirable city areas and increase with the more attractive locations. You can rent so many things nowadays by using specialist websites which will guide you and advice you through the whole process.

Get better at shopping

Simply, learn to shop more effectively. Try the supermarket’s own brands because they are often not very different than the branded products that you buy, but are significantly cheaper. Also avoid offers such as three for two because they are often items that you do not really need.

Switch banks

If you are not happy with the services that your bank provides you, you need to switch to another one that is more suitable for you. Some banks even offer cash as a motivating factor to switch so it could mean a better bank and some free money for you.  

Do market research

Even though online surveys might be annoying to fill in, they might be a good way to get paid. All you need is to have an opinion and be ready to share it. look out for websites that conduct paid online surveys and get going!

Some extra cash never hurts so think about the above options and start earning money!

What Does Budget 2014 Mean For You?

This month, George Osborne, the Chancellor of the Exchequer, has delivered his fifth Budget to the House of Commons. The new budget includes significant changes to savings and private pensions, as well as a few unexpected turnouts.

Here we will show some of the main areas of change and what these changes mean for you.

Personal Tax Allowance

From next year, the amount you have to earn before you start paying Income Tax rises to £10,500. Furthermore, the threshold for paying the 40% higher rate of Income Tax is increasing to £41,865 from April 2014 and after that, it will be increasing by 1% each following year.

Savings

There is a new single ISA which is created from the merger of Cash and Stocks & Shares ISAs. From the beginning of July 2014, the annual limit on how much you can save in an ISA is rising to £15,000. This will allow money to be moved from shares into cash which has been prohibited so far.

Furthermore, the Junior ISA limit will also increase to £4,000 a year.

There is good news for low income savers who will no longer have to pay a 10% tax rate on savings income. This new 0%rate will enjoy a larger amount of savings income from April 2015, going from £2,880 to £5,000.

Pensions

Pensioners will no longer have to buy annuity in order to access their pension savings and all other such limits are removed by the Government.

From April 2015, everyone who is retiring will be granted a free and impartial face-to-face advice.

Furthermore, if you decide to take all of your pension savings at the same time, this will be taxed as normal income, rather than at 55% rate as it is now.

Flexible drawdown, or the withdrawal of private pension pots, will be available to anyone who has an annual income of at least £12,000 from other sources. Before the amount was £20,000. Also, the amount of the pension that can be taken as a lump sum becomes £30,000, rather than the previous £18,000.

Air passenger duty

Soon reform is going to be implemented here too. From next year all long flights will carry the same lower band as flights to the United States of America.

Housing

Further reforms are expected in order to ensure that more homes are going to be built. Also, there will be £150 million to assist people build their own homes. There will be an extension of the current support for mortgage interest scheme to continue to 2016. Therefore, the Government claims nearly 200,000 new homes will be built as an outcome of these measures.