Category Archives: Money

Global Trends in Financial Services Regulation

Financial sector regulators globally have been taking measures to protect financial services consumers. The FCA in the UK, for instance, has been spearheading financial services regulation in the lending sector to ensure borrowers are safe from unscrupulous lenders.

The FCA’s regulatory reforms started in the payday loan sector and are expected to shift focus to regular banks as the FCA looks to protect all borrowers from unnecessary charges.
While the UK financial services regulator is busy streamlining the financial services industry, countries like Canada among many others are following suit. So what are the global trends being experienced in financial service regulation?

According to the 2017 Global Regulatory Development & Impacts report, global financial services regulation is focusing on; enhancing transparency, imposing statutory best interest on advisors, banning embedded commissions and improving advisory proficiency. The report touches on financial services regulation implemented in 16 countries. There are many variations in the report in regards to the type of financial products under regulation.

The report reveals that there is a special emphasis on restrictions imposed on investment products in some jurisdictions while other jurisdictions focus on almost all financial products ranging from investment to insurance, deposit, and mortgage as well as other commission driven products. Different countries have also approached conflict of interest issues differently indicating differing market characteristics. Nevertheless, something is being done globally in regards to financial services regulation. Below is a summary of the major global trends.

1. Most countries favour enhanced disclosure

Most countries globally are in favour of financial industry players improving disclosure as part of the new financial policies and principles. Out of all the 16 countries reviewed in the Global Regulatory Development & Impacts report, the U.S. is the only country that hasn’t implemented enhanced disclosure initiatives. This trend focuses on ensuring financial industry players offer their customers as much detailed information as possible on fees and commissions to boost transparency.

2. Most countries are in favour of banning embedded commissions although few have taken action

The report also indicates that most countries have reviewed options to ban embedded commissions. This move has been spearheaded by securities regulators in many jurisdictions however, only the U.K., Australia, the Netherlands and South Africa have proceeded to ban embedded commissions. This represents just 13% of the $39.4 trillion global mutual fund assets market. In most of the markets that have implemented the ban, the decision was triggered by local circumstances. In the U.K. for instance, the ban was triggered by scandals in the financial industry. In Australia, the ban was triggered in reaction to the collapse of three main financial industry firms.

In seven countries namely; Germany, Hong Kong, Ireland, Sweden, Denmark, Singapore and New Zealand, the governments as well as securities regulators have ruled out banning embedded commissions entirely but promised to take some action.
Europe, on the other hand, has proposed to restrict independent advisors from receiving commissions. Some analysts, however, claim that these efforts aren’t enough since the independent advice channel is the smallest in the EU funds industry representing 11% of the total assets. Most fund sales in the EU are done via banks where the restrictions don’t apply.

3. Few countries have a best interest standard

Although most countries have expressed interest in creating a fiduciary/best interest standard, Australia happens to be the only country with a broad statutory best interest standard in place for advisors in the retail funds’ industry. The U.S. has made some steps in the right direction as well by adopting a rule which makes the definition of fiduciary more extensive under the employment retirement income security law. This change makes investment advisers offering retirement advice as well as insurance agents and broker-dealers subject to a fiduciary standard. The rule was supposed to come into full effect on 9th June 2017.

Summary

There is a collective global effort to improve financial services regulation. Most countries are however in the formative stages of reform. The U.K. led the way with the FCA by introducing tough regulation against unscrupulous payday loan lenders to protect the huge population dependent on payday loans. The U.K. must do more in regards to regulating other financial industry players.

But let’s not forget most countries including Britain only started making financial services regulatory changes recently. It will take time before the success of ongoing and already established changes is evaluated conclusively globally. In the UK however, the FAMR (Financial Advice Market Review) has already seen major improvements in the financial advice industry. The U.K. now boasts of offering better quality financial advice. However, accessibility is still an issue. There is a need to do more, faster, in the U.K. and the world at large although the world is on the right path in regards to financial services regulation.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

6 Non-Financial Habits That Affect Your Finances

You don’t need to misappropriate your finances to find yourself in financial problems. Many factors affect your finances indirectly. Most of these factors revolve around habits. In fact, your habits more so, non-financial habits play a crucial role in your finances. Forget about impulse buying and exceeding credit card limits for a second.

Below are the main non-financial habits that make/break your finances.

1. Planning – You need to be a good planner to get ahead financially.

The rich aren’t just good planners financially but in every aspect of their life. A good planner knows how to manage their time well. Good planners also avoid habits like procrastination which are among the leading causes of failure in life. Planners also have more clarity and direction in life. They are better placed to achieve non-financial goals which contribute to success. If you want to be financially free, start by planning every aspect of your life including your leisure. You will be startled by the amount of money you will start making/saving in the process.

2. Healthy living – Adopting a healthy lifestyle also has a big impact on your finances.

Exercising and maintaining a healthy diet can save you a lot of money considering most health problems are lifestyle-related. Eating right and exercising daily can save you multiple trips to the doctor and pharmacy. Although most people think living a healthy lifestyle is expensive, it is possible to cut costs and save a substantial amount of money. For instance, you don’t need to buy organic vegetables and fruits from an organic grocery shop. You can set up your own kitchen garden with a little money. You can also keep fit without paying for expensive gym membership. You can walk or cycle to work every day and keep fit while saving transport costs. Contrary to popular belief, healthy living is cheaper as long as you plan well.

3. Reading – Reading is another great non-financial habit that affects your finances.

Developing a reading habit is a great way to get financial education. Most people have a hard time becoming financially independent because they are not financially literate. Reading is a great way to learn everything you need to know to improve your finances. The internet has a lot of useful information about money, investments, budgeting, planning, self-discipline, etc. You don’t have to pay a financial adviser to become a good financial planner or investor. Furthermore, reading is a cheap hobby/habit. You can get books for free from your local library. The internet also has affordable books with priceless information that will help you improve your finances directly and indirectly. Avid readers never stop learning about finances and other crucial subjects.

4. Optimism/pessimism – Your attitude about life in general has a significant effect on your finances.

Optimists tend to be more successful in life because they don’t treat challenges as permanent setbacks but important lessons. To be successful in life, you need to have a positive outlook on everything including money. Optimism can be defined as a habit since pessimism comes naturally to many people who face challenges in life. To become successful, you have to believe you have what it takes first and trust the process regardless of the hurdles you find on your way. It’s impossible to work hard when you are a pessimist. Pessimists also have a hard time identifying and seizing opportunities in life.

5. Getting up early – Most successful people are early-risers.

Almost everyone who is someone today attributes this habit to their success. So, why is getting up early a good habit? Well, first and foremost, early-risers have enough time to read, plan their day, exercise and do many other things that have a direct/indirect effect on their finances. Furthermore, most people are more productive in the morning. You are bound to get more things done in the morning than late at night. Most people prefer a head start than trying to catch up. This is precisely why getting up early is such a great habit.

6. Resting – You need to have enough sleep to be productive (at least 6 hours of sleep every day).

Resting also gives you time to think and forge better plans. Fatigue/stress is also a cause for many health problems today. Considering everyone seems to be in a hurry today, resting is another great non-financial habit that has a positive effect on your finances.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

9 Great Ways to Save Money in a Fancy Restaurant

The UK is home to some of the best restaurants in the world. Although fine dining experiences bring great pleasure to many, they can be prohibitively expensive if you don’t know how to find great deals. This article is for people who love fancy restaurants and bargains. Here are some great tips to help you save on your next fine dining experience.

1. Use deal websites

The internet is a great place to find deals. You can use websites like Groupon to find great fine dining discounts in the UK. Contrary to popular belief, fancy restaurants also offer great deals through deal websites, so it doesn’t hurt to go online and see what your favourite restaurant is offering. Deal websites are easy to use. You just need to visit the site and search for fancy restaurants near you. Alternatively, you can subscribe for updates to get notifications in your inbox when there are deals that might interest you.

2. Attend restaurant soft opens

New restaurants always have launches packed with great deals. Attending a fancy restaurant soft open is a great way to enjoy fine dining experiences at a bargain since prices are usually subsidised to attract customers. You can even dine for free in dry runs where the kitchen and waiting staff practice food preparation and serving before the official open. This tip is great as long as you have your ears on the ground. You need to keep tabs with the expansion strategy of your favourite restaurant to utilise this tip effectively.

3. Attend restaurant weeks/restaurant festivals

Many cities in the UK including London have special restaurant events such as restaurant weeks where participating restaurants offer amazing deals such as fixed prices (”bottomless meals”) among other incentives to walk-in customers. You just need to find out when the next restaurant event is happening near you to save money dining in a fancy restaurant.

4. Dine during lunch hour

Sometimes it’s as simple as choosing the time you visit a restaurant. Most fine dining restaurants in the UK and around the world have cheaper lunch menus. Although lunch menus may miss some offerings, you are assured of scoring a great meal at a bargain when you fine dine during lunch hours and not dinner time.

5. Avoid alcohol

Alcoholic drinks are usually overpriced in fancy restaurants so avoid alcohol at all costs if you wish to save some money. Ideally, you should focus on the unique food and have drinks elsewhere, later. If you have to take alcohol in a fancy restaurant, ask for the drinks menu first and then choose accordingly.

6. Consider regular menus over specials

Special meals aren’t usually the best priced. Fancy restaurants spend a lot of time and special ingredients coming up with specials. Although specials are meant to offer unique meals, they are also used to maximize profits per plate on simple ingredients or food that needs to be cleared out. So, ”don’t buy the hype”.

7. Ask for deals, gift cards,…

Fancy restaurants offer deals to those who ask. You can ask for gift cards online or in person if you want to treat a special person to a birthday dinner, anniversary dinner, etc. Fancy restaurants have deals for special occasions so don’t be afraid to ask. You can also go as far as asking your waiter for the best value meal/s, wine, etc. You can pay less for wine with a ripped label or a damaged top. Fancy restaurants care a lot about presentation so asking for the ”bin end list” is a great way to enjoy significant savings.

8. Split meals or skip appetisers and desert

You don’t have to take the full course meal. Fancy restaurants are guilty of serving you more food than you can consume. If the restaurant serves big portions, you can split appetizers and dessert with a companion. But don’t forget to ask since some restaurants charge extra for splitting menu items. Alternatively, you can skip appetisers and desert if the offering is nothing out of the norm. For instance, you can have some ice cream and cake when you get back home. Appetisers and desert are usually costly in fine dining establishments. You can save over 30% by taking the main meal only.

9. Apply for a reward credit card

Lastly, there are many credit card plans in the UK today that offer cash backs or points on purchases. You can get one specifically designed for dining purchases and save money as you eat in expensive restaurants in your area.

You can ”have your cake and eat it” if you use the above tips before enjoying your next fine dining experience. There are many ways to save in a fancy restaurant. Choose any one or more of the above tips.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

FCA Warning: Are Young People In The UK Borrowing Too Much?

In a recent ”Money Matters” interview with BBC, the C.E.O. of the FCA, Andrew Bailey expressed concerns about growing debt among young people aged between 18 and 34 years in the UK. His concerns came as the number of insolvent individuals in the 18 to 34 age bracket increased by 31% between years 2015 and 2016, according to the Insolvency Service.

The latest Insolvency Service statistics show that seaside towns in Wales and England have the worst debt levels among the youth in the UK. The towns that are worst hit include; Scarborough, Torbay, and the Isle of Wight.

The FCA is currently focusing on sustainable, affordable credit, i.e., reducing high-cost payday loans and long-term credit card debt. In his interview, Bailey warned that there is an increasing number of young UK citizens taking out credit cards and payday loans among other short-term credit loans to cater for basic living expenses.

Although Bailey goes ahead to state that the current debt levels haven’t reached a critical level from a macroeconomic standpoint, there are serious concerns about why debt levels are increasing among young people. Bailey attributes this new disturbing trend to a generational shift in patterns of wealth and income. He doesn’t view this trend as reckless borrowing per se, but an indication of the current basic living standards.

Bailey feels basic living costs have increased drastically over the decades forcing the young generation to borrow more to meet essential living costs. He points out specifics like the high cost of rental houses as well as poor/lack of income growth as the main causes of the debt problem. Today’s youth also have lower asset ownership levels which is a different generational experience from decades ago.

Bailey also attributes the current debt levels among the youth to an increase in ”unsecured lending” ranging from credit cards and overdrafts to car loan and personal loans. According to the latest Bank of England statistics, consumer debt now stands at over £200 billion and increasing drastically at 10% every year. Savings are also decreasing due to low interest rates and higher cost of living.

Other sentiments

According to Vince Cable, the Liberal Democrat Leader, the current debt problem among young people in the UK is attributed to the conservatives’ failure to implement their manifesto pledge on creating better laws for people facing financial difficulties. Cable claims the pledge to offer legal protection ranging from interest to charges and bailiffs for 6 weeks to individuals in distress because of debt will go a long way to solve the debt problem in the UK.

Jonathan Reynolds who is the Treasury’s shadow economic secretary finds a lot of human tragedy in the UK debt story. According to him, the youth don’t have a choice. Labour suggests there should be a cap on charges on other forms of short-term debt in line with the payday loan cap. According to Shadow Chancellor, John McDonnell, there is a need for special focus on credit card debt which has spiralled out of control. McDonnell has plans to help over 3 million people in the UK who are currently paying more than they should in interest payments.

Joanna Elson, the C.E.O. of Money Advice Trust agrees with Andrew Bailey’s sentiments. Elson states that although the current debt levels among the youth may not be severe to the economy, the trend has a critical effect on an individual level. Elson stresses the importance of debt advice but recognises the fact that very few young people are seeking financial advice when they find themselves in financial problems.

FCA intervention

The FCA is currently looking at some practices as well as forms of high-cost debt which are the main contributors to the UK debt problem. Although a lot has been done to regulate payday loans among other short-term loans in the recent past, the FCA boss would love to see increased focus on sustainable, affordable credit provision. The FCA has also turned its attention to the rent-to-own industry which charges high interest for ”white goods” like washing machines.

The FCA clampdown on payday loan lenders which started in 2015 brought sanity to a troubled industry. Payday loan charges are now capped. Borrowers don’t need to worry about affordability as long as they choose a reputable payday lender. Furthermore, there has been reduced over-dependence on payday loans according to Treasury select committee member, Kit Malthouse.

The next step is making the payday loan rules an industry standard. The FCA boss has stressed the importance of sustainable credit in society and offered assurances on maintaining a close eye on high-cost lending going forward.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

How Mobile Providers are Ripping You Off: Smartphone Money Saving Tips

According to a recent Deloitte survey, Smartphone penetration rates now stand at approximately 80% in the UK. Smartphones have become incredibly popular in the UK and the world at large because they offer more communication options, endless applications, unlimited web browsing capabilities, unmatched entertainment and so much more compared to traditional mobile phones.

It is, however, worth noting that these added advantages come at a cost. Furthermore, there is a general consensus that mobile providers do very little to help their customers manage costs. Given the high cost of living and stagnant income growth in the UK, it’s important to find ways of cutting costs and saving to avoid over-dependence on payday loans among other types of short-term loans. Here’s how your mobile provider is ripping you off and what you can do;

1. Unlimited plans which aren’t unlimited

Smartphone users love unlimited data plans especially when data usage is concerned. In a world where live streaming rules, unlimited plans are highly sought after. What most Smartphone users fail to realise is; most unlimited plans have hidden limits which make them limited. For instance, unlimited data usually comes with speed and/or device limits if you exceed a certain limit. Mobile providers do maximize profits without causing congestion in their networks. To avoid paying for an unlimited plan which is not really unlimited, it’s important to do your own research before jumping on any unlimited plans that come your way.

2. Too much/too little insurance

Smartphone purchases via mobile providers usually cover repairs and replacements resulting from damage. There are however limits to this coverage. In most cases, you have to part with more money to insure your phone adequately against the most common Smartphone risks. In simpler terms, the insurance coverage you get when you buy a phone from your mobile provider is very basic.

On the contrary, mobile providers are also guilty of selling too much insurance to Smartphone buyers. You should check what is covered in your warranty, free insurance plan, and credit card plan (if you have any) when you buy your Smartphone to avoid incurring unnecessary costs. Mobile providers make money from selling Smartphones insurance, so research for a cover that serves you well instead of taking what is on offer. It’s also important to consider the fact that you may already have coverage.

3. Hidden contract terms

Mobile providers are also guilty of hiding contract terms, yet these details are crucial for controlling monthly Smartphone expenses regardless of the type of plan you have. You can find contract term details in your mobile provider’s website. It is important to read the terms yourself and seek clarification if needed as opposed to relying on what a mobile provider salesperson tells you. Mobile providers usually hide crucial information on upgrade fees, international roaming fees, overage fees and many other fees/conditions in lengthy contracts yet this information is vital for controlling cost. So, take time and read your contract to the letter.

4. Unauthorised/unnecessary text charges

Some mobile plans come with unlimited texting while others charge you a fee for every text sent. Others also charge for promotional texts received. It is important to avoid replying to unsolicited text which are promotional in nature. Such texts come in many forms i.e. as questions requiring an answer. You should avoid replying to such texts and anything you have not subscribed to. It’s also important to understand the texting limits of unlimited plans. You should also consider using free texting/messaging services today like Whatsapp or Facebook messenger to reduce your texting costs significantly. Such services are usually free if you have a Wi-Fi connection.

5. No cash on trade-ins

Mobile providers pay in credit as opposed to cash for old phones. They also tend to take longer compared to private options such as dedicated buyback companies which give cash instantly or send it within a few days. Furthermore, they tend to offer lower payouts for trade-ins (approximately 30% less) for old cell phones compared to buyback companies. It’s, therefore, better to sell your old phone through buyback companies when you are looking for an upgrade if you want to get the best value.

You stand to enjoy substantial savings and avoid reliance on short term loans by understanding how mobile providers rip off their clients. You can save £100 + pounds every year by understanding the terms of your mobile plan/contract and choosing insurance plans carefully. Avoiding texts and mobile provider trade-ins can also go a long way in reducing the money you spend on your Smartphone.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

10 Years Later, UK is Getting Ready for Another Debt Crisis

Ten years after the dreaded 2007 credit crunch, the signs of another impending debt crisis have begun to show. Prices are rising nonstop year after year while wages remain the same. Many people have also resulted to loans to survive. Unsecured consumer debt has reached the 2008 levels at over £200 billion and what’s shocking is; it’s rising by over 10% every year. In a nutshell, the UK is back to where it was before the credit crunch. The only difference is, there are concerns about it early.

Concerns

Credit rating agency Moody’s and the Bank of England are among the institutions which have raised concerns about the impending debt crisis. The concerns of these institutions are however focused on the risks the current debt situation has on the economy.

The FCA (Financial Conduct Authority) has also expressed concerns and appears to do a better job by breaking the problem down at street level. According to the FCA, one in every six people with credit card debt, personal lending as well as car loans is in serious trouble. This translates to approximately 2.2 million people.

A recent TUC report dubbed ”Britain in the Red” highlighted this issue in 2016. According to the report, 3.2 million UK households were experiencing debt problems with 1.6 million people in serious debt problems i.e. spending over 40% of their monthly income to service debt.

What’s to blame?

The 2007 crash was blamed on reckless spending on luxury as well as household goods. The situation today isn’t much different with the biggest blame falling on cars.

Repercussions

One of the most favourite ways of getting money to spend on luxuries and household goods as a home owner in the past was to remortgage your home. But this only worked for homeowners who had bought homes before the market reached its peak. For those who are buying now, remortgaging isn’t an option. If the interest rates rise by 1%, 18,000 Britons risk going bankrupt according to the Insolvency Service.

The problem

The UK is just about to get into another debt crisis because of several factors. One, zero-interest deals are in abundance again. Many people are managing their credit cards by simply transferring debt. According to recent statistics, 43% of all credit card users in the UK have zero-interest deals. This may appear favorable to borrowers on face value, however; it has left many in persistent debt. Lenders love customers who manage to meet their minimum monthly repayment objectives. There are millions of such borrowers in the UK.

Personal loans are also a problem. Before the 2007 crash, the payday loan industry in the UK wasn’t as big. Nevertheless, people had begun depending on payday loans for survival. Statistics indicate that approximately 250,000 people were using short term loans such as payday loans as of December 2006.

The demand for short-term loans is also a problem. The recent payday loan regulations have made it harder for payday loan lenders to exploit vulnerable borrowers. However, the regulation can’t deal with the demand. Today, few people can be able to survive without debt. In 2017, debt is being taken for basic necessities as opposed to luxuries.

The reasons behind this are obvious. Wages have stagnated, yet prices keep rising. After the 2007 debt crisis, households cut off spending on new items. With time, however, spending is inevitable since things become old or get damaged. Most personal loans today are on rent-to-buy deals. Modern necessities i.e. white goods are being acquired more and more this way today.

What’s more is; people don’t save to buy such goods anymore. The low-interest rates have discouraged saving. As a result, fewer households have funds for catering for emergencies, let alone white goods when they are needed.

The biggest problem of them all is Britain’s skewed economy where wages don’t match the cost of living. Although low wages have been a problem for a long time, there were incentives like tax credits before. Today, the welfare state is being used to punish people. Individuals who are dependent are forced into accepting poor pay/conditions as well as debt simply because they don’t have an alternative.

Unsecured loans replaced Government tax credits after the crash.

The effects of this is; the poor will get poorer while the rich get richer. All signs show that the UK is getting into another debt crisis soon, unless something drastic is done to boost wages.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

UK Household Debt in Figures as of 2017

The latest official government statistics indicate that UK household debt has increased by 7% since 2012 with consumer credit and student loans being the worst hit. The 7% increase has been adjusted for inflation. Back in 2012, the total UK household debt stood at £1.52 trillion. The debt has increased to £1.63 trillion as of March 2017.

The Bank of England and Student Loan Company statistics for individual household debt segments show that mortgage loans increased from £1.2 trillion to £1.33 trillion from 2012 to 2017. Student debt increased from £46.9 billion to £100.5 billion while consumer credit increased from £159.6 billion to £197.3 billion during the same period. Although the UK government plans to reduce its yearly deficit going forward every year until 2025, UK households are headed in the opposite direction. The household debt and GDP ratio is set to heat the peak as was the case before the financial crash.

The wage growth has grown by a mere 0.7% when adjusted for inflation minus bonuses over the same period. This growth figure clearly shows that UK consumers have turned to loans to buy essentials. Incredibly low interest rates have managed to keep mortgage loan costs down. However, this is a cause of concern since a small increase in interest rates may pose serious financial challenges to many borrowers given the current debt climate.

Borrowing on second mortgages and credit cards has increased drastically making things worse. Most UK households have increased their debt uptake twofold by getting into arrears on monthly bills such as council tax. Let’s take a close look at unsecured credit, car finance, mortgages, student debt and arrears.

Unsecured credit

UK consumer credit levels have increased by 19% since 2012. The consumer credit levels currently are the same as those experienced back in September 2010. Unsecured consumer debt was at 45% of the total household income in 2007. In the years following the economic recession, UK households were forced to deal with bad credit habits which resulted in a decline in borrowing and an increase in savings. Unsecured debt levels were at 35% of the total household income in 2012, but since then, UK households have failed to clear store and credit card bills. Charges on those cards have increased unsecured credit debt drastically. According to the Office of Budget Responsibility, unsecured household debt in the UK is set to hit 47% of the total household income by 2021. In the past year (July 2016 to July 2017), the debt has increased from £192bn to £201.5bn when adjusted for inflation (a 4.9% increase).

Car Finance

The latest statistics show that auto finance dealers issued more than £30 billion as new credit in 2016 alone. These types of loans have become increasingly popular because they are cheaper than regular car loans. Borrowers can also make lower monthly repayments. In fact, this type of car finance currently controls 86% of the new car finance market. Over a million cars are being bought in Britain using auto finance dealer loans. The main cause for concern is this form of lending isn’t highly regulated which poses serious risks in the future.

Mortgages

The Mortgage debt levels have increased by 2% since 2012. This household debt segment isn’t as marked as the others although there are concerns of borrower risks if the Bank of England raises rates in the near future. The UK government has done a lot to revive the mortgage industry such as giving subsidies to 1st time home buyers. Some critics argue that this has encouraged unhealthy borrowing, i.e., people who wouldn’t qualify for a mortgage normally getting easy access. Furthermore, over 40% of all mortgage borrowers in the UK today haven’t been forced to deal with an interest rate hike which makes repayment obligations harder triggering cutbacks on spending and foreclosures in worst case scenarios. Considering there is a looming Bank of England interest rate hike by the end of 2017, the mortgage industry is set for tough times ahead.

Student debt

Student debt levels in the UK have surpassed other forms of debt. Since 2012, the student debt levels have doubled to £100.5 billion. This is raising concerns on how UK students should be funded considering the recent hike in fees to £9,250 this year. Furthermore, the slow growth in wages coupled with increasing taxes is bound to make it hard for UK graduates to meet their student debt obligations.

Arrears

Utility bill arrears are usually an indication of financial distress. Council tax arrears in the UK have increased by 12% between 2012 and 2017. UK households have arrears on water bills, power bills and gas bills. A continuation of this trend could make it impossible for UK households to enjoy basic services.

International perspective

UK households are the 2nd most indebted among the G8 nations. The UK also has a large trade deficit and a government spending shortfall. This can only make the looming debt crisis worse if drastic action isn’t taken.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

Tips on Household Budget Planning

Maintaining a household budget is very important. However, it takes more than a budget to manage your finances accordingly. Let’s face it! Most budgets don’t work. The reason behind this is simple. Most budgets concentrate on typical monthly spending ignoring other small but significant expenditures like daily coffee, weekly shopping, annual holiday, etc.

Here’s a great budgeting guide to help you manage every single penny, but first things first.

Why should you budget?

The main reason for budgeting is to ensure you don’t spend more than you earn. You need to determine the amount of money you can afford to spend every month to be able to move ahead financially. Budgeting also helps you find out where your money has been going which is the first step to adjusting your spending habits/priorities.

Typical budgets fail because they underestimate the real expenditure missing costs that have a significant effect. Using broad categories when preparing a budget makes it easy to miss those small expenditures that can add up to large amounts of money every year. For instance, most people usually indicate fuel and service costs when preparing car budget sections. Very few people remember to include insurance, breakdown, and new tyre costs.

Effective household budget planning

Step 1: Gather your latest payslips and find out how much you earn

To create a manageable household budget, you need to know how much you make first. Most people earn less than they think (after tax and other deductions) which creates avenues for overspending. To avoid this, take your payslips for the last three months and establish how much money is deposited into your bank account after all applicable deductions.

Step 2: Gather all your credit card and bank statements

Before you draw up your household budget, it’s also important to get your bank/credit card statements for the last three months. This statements list all direct debits, standing orders and many other expenditures giving you an accurate picture of your spending habits. This step will help you find out how much you spend on every category such as food. Don’t forget to consider every possible expense. You can follow the paper trail to find out your actual expenditure.

Step 3: Determine your income/expenditure patterns

Once you determine how much you make and how much you spend, it’s easy to determine the correct status of your finances. At this stage, it’s extremely important, to be honest with yourself. If you spend more than you earn, you need to take drastic measures to avoid getting into a debt spiral if you are not in one already.

Step 4: Start saving painlessly

If you are spending more than you earn, you need to start cutting back on unnecessary expenses to build your savings account. This should be done painlessly otherwise it won’t work. It’s not advisable to make drastic lifestyle changes. You can start by looking at possible savings on energy bills and credit cards and then move to other saving avenues like childcare. In simple terms, don’t focus on the obvious. There are many ways to save painlessly if you look carefully.

Step 5: Draft a new budget incorporating expected savings

The reason why most initial household budgets don’t serve people well is because they don’t highlight the real income and expenses. After going through step 1 to 3, this should no longer be a problem. Incorporate the new income, expenses and expected savings.

Cutting back

If you need to cut back on your spending, focus on starting small. You can also do less every month and consider selling things you don’t really need until you start living within your means. You should also focus on cutting back on things like magazines, chocolate, cigarettes, alcohol, movies, etc. that aren’t needs.

Important household budgeting facts/tips

1. Self-discipline is key: You can prepare the best budget in the world, however, if you don’t stick to it, you won’t get far.

2. Focus on affordability: To get back on track with your finances, you must focus on the most affordable way of doing something as opposed to the cheapest way. A cheap item can still be too expensive for you, so it’s important to focus on how much you have and then plan your spending around that.

3. Set up different accounts: To budget effectively, it’s important to categorise expenses. Ideally, you need different accounts for different expenses, i.e., a mortgage account, big purchases account, holiday account and a savings/emergency account to avoid missing expenses. Your main bank account should be separate from your bills account. However, pay attention to the charges and open accounts with minimal to no charges.

4. Set up standing orders: To make your budgeting process seamless, it’s important to have standing orders to feed your different accounts. Most people overspend when they see they have a lot of money in their main account when this isn’t the case in reality.

Household budget planning is easy when you have an accurate picture of your income and expenses. Some discipline is also important as well as a seamless/painless process. Luckily, you have all the information you need now to budget successfully going forward. Don’t forget to use budgeting tools/technology to your advantage.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.