Cost of Christmas causes concern for consumers

The rising cost of living is taking its toll on the British public and, with Christmas looming, it might not be long before the nation spirals into debt.

Research from price comparison website, MoneySupermarket , found that 60% of the public is worried about Christmas debt.

Over 50% of people had serious concerns about how they would cope financially over the holiday season.

“For many families Christmas is always a financially tricky time. Ultimately, Christmas needn’t be a financial headache,” said Kevin Mountford, Head of Banking at MoneySupermaket.

Funding the festivities could be particularly difficult for many this year as the rate of inflation is expected to increase to 5% before the end of the year. Higher gas and electricity bills are likely to tighten the purse strings further.

“This year will be tougher than most as a result of the increases in the cost of living and widespread pay freezes. It’s no surprise therefore to see that more people are worried about funding the festive period this year compared to previous years,” continued Mr. Mountford.

“If you cannot afford to borrow to fund the festivities or don’t have any savings, don’t despair. Consider having a thrifty Christmas and make your own cards and presents – we are all feeling the pinch and doing Christmas on the cheap needn’t prevent you enjoying the occasion.”

Christmas Debt

Overspending during the festive season is common, many people turn to credit cards in order to be able to afford the gifts, travel, food and other expenses.

However, if people become too reliant on financial products they could soon find themselves in debt.

If you are concerned about the cost of Christmas this year, you could talk to Debt Advice Group who can offer specialist and confidential  debt advice.

Confidential advice could be offered to discuss debt problems.

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Inflation increase pushes consumers deeper into debt

Inflation increase pushes consumers deeper into debt

The inflation rate rose to 4.5% in August, according to the latest figures from the Office for National Statistics.
The main contributing factors included rising utility bills, higher food and clothing prices.

The rate increased from 4.4% in July and the Bank of England expects the Consumer Price Index to rise to 5% before the end of the year.

This is grave news for consumers as the cost of living soars, plummeting UK households further into debt.

Wages are not rising in line with inflation though, which leaves consumers with less to spend and more debts to cover.

The price of clothing and footwear increased at the fastest rate on record (3.7%) for the July to August period.

The end of the summer sales and introduction to autumn prices saw female clothing increase more than male or children’s wear.

Furniture and home goods also experienced a price rise, from 2% between July and August compared with a 1 % rise a year ago.

The biggest annual rise in the water and energy bills in more than two years has also pushed up the rate of inflation.

Gas and electricity prices from 5 of the “big 6 “energy suppliers have risen by around 20%, adding between £150 and £200 to the average annual fuel bill.

The inflation rate is now double the Bank of England’s target rate of 2%, with little sign of returning to the target rate soon.

The increased rate of inflation will have a detrimental effect on the pockets of cash-strapped Brits.

New research from Alliance Trust Savings found that 65-74 year olds are the age group which will suffer the highest inflation rate at 5.4%, which is the fastest rate of price change since October 2008.

Those under 30 face an inflation rate of 4.9%, which is the highest rate to face people in this age bracket since September 2008.

Mounting debt prevents Brits from saving

Kevin Mountford, head of banking at moneysupermarket.com, commented on the increased cost of living, “Basic rate tax payers now need an account paying at least 5.63 per cent just to preserve the value of their savings, rising to 7.51 per cent for higher rate tax payers and a staggering 9.01 per cent for savers paying the top rate of tax. Currently no savings accounts pay enough to offset the damage done by inflation.

“While most savers won’t be able to secure an inflation beating product, it is still vitally important they check their rates and be prepared to switch if they are not on the most competitive deal. The difference between the average and top paying rates is considerable, so moving to a better deal can go a huge way in helping savers limit the impact on their pots.

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Consumers get financial advice from friends and family

It has been reported that more and more consumers are now turning to friends and family in order to get advice about their finances rather than opting to go to a professional in the field. A study was carried out by insurance giant Aviva, which indicated that the majority of people felt more comfortable asking members of their family of friends for help and advice relating to financial matters than asking an industry professional.

With so many people having debt to deal with and many others feeling confused about their financial situations, the need to get advice has become more and more prevalent. The study results showed that only around one fifth of consumers were inclined to go to a financial advisor in the first instance in order to get financial advice. However, the figures did show that the older people became the more likely they were to go to an independent financial advisor.

The study was carried out to examine consumer attitudes towards their finances and how valuable consumers found professional financial advice to be. Almost three quarters of those aged between eighteen and twenty four said that they would turn to friends and family for advice rather than going to a professional. However, only one quarter of those aged sixty five and over would opt to ask friends and family over a financial advisor. The results of the study further suggested that there was a general lack of understanding amongst consumers with regards to the advice and services that independent financial advisors were able to offer.

One spokesperson from Aviva said: “It’s a concern that so many people are relying on friends or family and the internet for financial advice, and that they are not aware of what an IFA could offer them.”

Tags: Financial adviser, insurance, Certified Financial Planner, Independent Financial Adviser, debt, financial advisors, financial advisor

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Debt problems causing increased stress for British consumers

A recent poll conducted by Scottish Provident has found that people with the greatest debt problems and money worries are suffering from more stress than the average British person.

In the survey, a total of 37 per cent of UK adults said that they would describe themselves as either “stressed” or “very stressed”. However, this situation was revealed to be much worse for those with pressing debt management problems.

Of those describing themselves as stressed, 49 per cent were people without any savings and 47 per cent were those who couldn’t afford to put any spare cash aside. For many of these people, it will be the case that any savings will have been used to cover loan and credit card debt repayments, as well as helping other monthly expenses to be met.

Susan Barclay, who is the head of marketing at Scottish Provident, commented on the results of the poll. She said:

“It is no surprise given the current financial climate that many millions are feeling the pressure and becoming stressed.

“The soaring cost of living, coupled with concerns about job security, will lead many to question how they will be able to pay their bills against a backdrop of inflationary pressures and wage freezes.”

The Scottish Provident poll is not the only piece of research to suggest that British consumers are increasingly worried about their finances. A study conducted for The Co-operative Bank recently revealed that around 80 per cent of Brits are currently worried about money, with most of their concerns centring on the increasing cost of energy bills.

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Consumers warned about April tax shock

Wednesday 16th March 2011 The UK's working population could be in for a financial shock at the beginning of next month.All 29 million workers will be stunned by changes to tax and benefits, according to new reports.The charity Credit Action has identified 45 tax and benefit changes, which will take effect on April 6, in its latest report.Many households will be hundreds of pounds a year worse off, with better-off families being hit the hardest, according to figures calculated by the Institute for Fiscal Studies (IFS).The average loss to families will be £200 a year, which comes after changes in January which saw a rise in VAT, accounting for a total of £680.The biggest change for most people next month will be income tax. Calculations suggest 750,000 more people will pay tax at the higher rate of 40 per cent because the higher rate threshold has fallen from £43,875 to £42,475.Speaking to DMT, Credit Action’s Joanna Parsley said: "If you don't think about the changes until April, you might be in for a bit of a shock, as 45 major changes will come into play and these will affect everyone- there really is no way to avoid them. “Over a million people will be affected by the changes to tax, as according to the IFS, 750,000 people will become higher rate tax payers and 500,000 will stop paying income tax.” As far as National Insurance contributions are concerned, all 29 million employees in the UK will pay an extra 1 per cent, rising from 11 to 12 per cent.But higher earners are not exempt from rate increases.Until recently, employees had to earn over £844 a week to pay an additional rate for higher earners. However, from April 6, anyone earning more than £817 a week will pay, with the contribution rate doubling from one to two per cent.Taking both the tax and NI changes into account, the IFS estimates than anyone earning more than £35,000 a year will be worse off.In addition to tax and national insurance, there are changes to working and child tax credits. Child benefit will be frozen for three years, before being phased out for many families in 2012.Child tax credit will be reduced for some, with the baby element removed altogether.As if the tax and benefit changes were not difficult enough, millions of households are also being squeezed by inflation.The rise in VAT to 20 per cent in January has had a knock-on effect on inflation, hitting restaurant bills, new cars and alcoholic drinks.The price of petrol and diesel has risen dramatically, with the duty still due to rise by 2 per cent above inflation in the forthcoming budget.Joanna continued: “Combined with the changes to National Insurance it’s vital that we all check our payslips closely to see how the changes have impacted on our take home pay.“Although not all of the 45 changes will have a detrimental impact, changes to tax and welfare benefits coupled with rising energy and food prices, and fears over potential interest rate rises and further job losses, mean that household budgets in 2011 will continue to be squeezed.Joanna had some words of warning for those concerned about the changes.“It is vital that with under a month to go until these changes take effect everyone looks to revisit their finances and get them in order. Budgeting is key and the easy to use interactive Credit Action Budget Builder allows everyone to budget simply and easily,” she said.On a positive note, half a million people will be taken out of the tax bracket altogether. That is because the amount anyone is allowed to earn before paying tax rises from £6,475 to £7,475.
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Insolvency Service Warns consumers about wedding costs

by Nazma Noor on February 23rd, 2011

The Insolvency Service has recently issued a warning to couples planning their weddings this year – ensure that wedding suppliers are financially stable.

Weddings can be costly and if you’re on a tight budget the last thing you need is one of your wedding suppliers disappearing with your deposit.

A recent example of this happening is Anouska Antonia Semp, the 35 year-old former director of Avorio, a Sheffield-based bridalwear retail company. On 25 January 2011, she was declared bankrupt at Barnsley County Court.

Similarly, another bridal wear shop in Peterborough, Perfections, had one of their business partners file for bankruptcy this year. The landlord of the premises they rented sealed the doors and withheld stock in lieu of outstanding rent payments. As part of the initial investigation by the local Official Receiver(the government officer responsible for investigating financial failure) it was found that the shop had taken more than 80 deposits of around £300 each on wedding dresses. The brides, being unsecured creditors, are now unlikely to receive the wedding dresses they ordered.

It’s not just bridalwear shops you need to be wary of, in August 2010 Peter Gelardi and Pepita Diamand, directors of Wrapit PLC, a failed wedding gift company, were disqualified from acting as company directors for a total of 15 years when an Insolvency Service investigation found they had continued to take payments from customers of at least £872,000 when they knew the company was insolvent. Wrapit’s accounts showed the company had never made a profit and when it collapsed in 2008 there were 72,000 undelivered wedding gifts for which the company owed over £4 million.

The Insolvency Service has advised anybody planning their wedding this year to make a few simple checks before paying deposits or entering into a contract with a wedding supplier or venue. Below are the checks and how you can make them:

You can check if a director is subject to a bankruptcy order or has been disqualified from the world of business, on the Insolvency Servuce website database here: Disqualified Directors Search.

Again, this can be checked online for free and more detailed information can be accessed at a charge of £1. You can check for this information on the Companies House website.

If you’re looking for some tips for planning a budget wedding, see the blog we wrote about this last year: Weddings and debt, two things that always go hand in hand? and if you’re in an IVA and want to find out how getting married will affect your arrangement, read our blog about this here: Marriage, Divorce and Debts.

Do you have any tips for planning a wedding, whether they be about how to save or how to protect yourself from financially unstable suppliers? Leave a comment below and share your views now!

By Nazma Noor and is filed under Managing Your Money.
Tagged with: debt, insolvency, shopping, weddings.
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CCCS urges consumers to take action

The Consumer Credit Counselling Service has recently been offering tips and advice to consumers, and has urged those in debt to take action rather than burying their heads in the sand and trying to ignore their debt problems. Last year has been identified as having the overall highest number of personal insolvencies since records began in 1960, and this is despite the fact that insolvency numbers dropped off in the last three months of the year.

The Consumer Credit Counselling Service is now concerned that a rising number of people may end up turning to this sort of measure because of their debt, even in cases where insolvency was not necessarily the only solution. With job cuts, living cost increases, and wage freezes set to continue over the course of this year more and more people could find themselves facing financial problems according to the charity.

The CCCS has suggested that consumers avoid burying their heads in the sand, and instead take the time to take stock of their debts and finances so that they can figure out a way to solve the problem. Many may be able to ease the strain by more effective budgeting and financial control. Others may be able to get debt management advice from charities such as the CCCS. There are a number of different options that can be considered before personal insolvency.

One official said: “With so many factors adversely affecting consumers’ household budgets and finances it is little wonder that so many people are struggling at the moment. This is something that could continue over the course of this year. However, consumers shouldn’t assume that insolvency is the easy way out – it isn’t, as it can create huge barriers and financial issues in the future.”

Tags: measure, three months, debt, action, job, financial

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Consumers should budget to pay off credit card debtDebt advisory service urges homeowner to seek advice if necessaryMisleading debt advice sites closed by regulatorInsolvency figures show unexpected fallMore pensioners going bankrupt

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