There are few UK consumers
out there who aren’t worried about money at the moment. We’ve just lived through some of the highest spending and credit rich years we’ve ever known and, now the recession has arrived, many of us are finding it hard to cope financially. Some of us may be finding it hard to manage our debts already whilst others may simply be worried about how they will cope in the future if things go wrong.
There were specific warning signs as early as mid-2008 that our credit habits were getting out of hand. For the last few years unemployment has been low, people have been able to earn good money and credit applications were almost always approved. If we didn’t have cash then we borrowed to buy/do what we wanted. This would have seen previous generations turning in their graves – they were taught to save before you buy, after all!
The reason that so many people are having debt problems is that credit has been handed out easily for so long. For many people the warning signs have been there for a while with the regular need for new sources of credit such as credit cards and loans to help shore up their everyday finances. Unfortunately, they were not able to counteract the effects of all this borrowing by saving at the same time.
- For example, the financial advisory service Unbiased.co.uk reported that UK consumers borrowed almost £23 billion in the first quarter of 2008. This was a massive rise on 2007 figures for the same period when we borrowed just over £9.5 billion. But, during the same period the money that was being saved for that rainy day was dropping.
The problem that many people are now experiencing is the fact that the rainy day has now arrived but their financial problems can seem insurmountable. The fact that borrowing has been so high left many people struggling to cope even in a buoyant economic climate. Given that we are now deep in recession this is causing real problems now.
The fact is it only takes one thing to push you over the edge into financial difficulty if you are heavily in debt. You might lose your job, for example, or have your working hours/overtime cut back. You may not get a bonus you were relying on. These are just some of the things that you can expect to happen at some point in a recession. They are much harder to cope with, however, if you are already in debt and have no savings to fall back on.
If you find yourself in financial trouble then the best move you can make is to take some independent advice to see what you can do to improve your situation. You may need to take specific action such as a debt management plan, a consolidation loan or even a route such as an IVA or bankruptcy action. But, until you get advice you won’t know where you actually stand.