Y o u r M o n e y


Your S


Money


YOU HAVE STAYING POWER BUT WHAT ABOUT WILLPOWER? by Al Voice, Managing Director of Forces Financial


everal generations ago borrowing money carried a heavy social stigma - to borrow was to admit to living beyond one's means, and living on the ‘never never’ was viewed as the route to personal and


financial decay. But increased homeownership, the availability of credit and easy access to loans not to mention student loans, has resulted in Britons now owing more than 1,300 billion pounds in personal debt.


Not since the early 1990s, when the last economic recession claimed its final victims, has so much debt pain been felt by so many people. Debt charities and credit industry bodies are seeing an unprecedented increase in the number of people unable to pay their bills. But this time around youngsters are also finding themselves in trouble, as they are able to borrow far more than in the past without assets to fall back on should they get into difficulty.


My aim is to provide some guidance on how to ensure your borrowing stays under control, and what to do if you need to get a grip of your finances and release yourself from the debt trap.


Lets start with keeping that expenditure under control. For those in the military the issues are no different, wearing a uniform or flying an aircraft does not act as some kind of barrier against debt pain. Indeed there is only one protection known to man and that isWILLPOWER. So here follows some advice built around that very word.


When borrowing money always ensure you can afford the repayments. Start saving the equivalent amount for at least three months before taking out a loan.


Increases in pay. Have the discipline to automatically save 10% of every increase you earn.


Learn to budget, and stick to the amounts you have allocated to each area of expenditure. Debt counsellors constantly highlight that people often did not see the problems mounting.


If you don’t know where you are going how can you hope to get there?


Leave the decision until tomorrow. Never buy on impulse; it can seriously damage your health.


Plan your finances effectively. Holiday money can be accumulated before you go on leave, rather than finding yourself in debt when you get back.


Overheating. Borrowing out of control? Warning signs include a credit card balance permanently stuck at 25% of annual income, and total unsecured loans of more than 75% of income.


When making any substantial purchases shop around and negotiate. The worldwide web has certainly made this easier.


Evil according to the Bible is gambling. It can quickly cause damage to your wallet. But If you can’t resist at least stick to a pre-determined amount.


Repay loans and debts before you start saving.


And remember, choose friends and partners you can afford. If you only earn beer money a champagne partner will cause you problems. So don’t be seduced, have plenty of willpower and take cold showers!


But for some this advice may have come too late, or indeed as a result of reading this the reality of your position may have struck home. So lets RESCUE the situation with tips on what to do if you find yourself in debt distress.


Reality strikes


Admitting your financial situation is getting out of hand and that you need help is an important first step. Contact your creditors, tell them you are having difficulties and let them know why. Confirm how much you owe and let them know you will be back in touch with a schedule of payments once you have worked out what you can afford to pay. Let things drift and you are likely to default and be blacklisted for future credit.


Essential scheduling


Once you have received replies you should draw up a schedule of your debts and divide them into priority and secondary creditors. Priority treatment must be given to those debts where non-payment could lead to you losing your home, liberty or fuel supply. Any debts where Country Court Judgements have been made also fall into this category.


Also check that you are actually responsible for all your debts. A husband and wife are not responsible for each other’s debts unless they have both signed the agreement (except for Council Tax), and you cannot inherit a dead person’s debts.


Statement of affairs The next step is to draw up a financial statement to include all the income you receive (check you are getting all the benefits you are entitled to) and all money going out. Take a long hard look at this and consider any action you can take to increase your income and where any savings can be made – but remember you need enough to live on; not just survive on.


Consolidation or not?


Many people’s first instinct is to take on more debt by taking what the credit industry calls a consolidation loan. Think carefully before doing this. Can you really afford the new repayments? It may make things worse rather than better. Consolidation loan firms may seek to secure such loans on your home, which could put it at risk.


Under control Having worked out your priority creditors write to them with your repayment proposals. Make your offers relative and realistic, remembering that you may have to maintain these payments for some time, and for your creditors small but regular payments will be better than none.


Expert advice


Above all remember that now you have decided to take action you are not alone, there are a number of specialist organisations out there ready to help you with free confidential, independent advice. I emphasise these are free – whatever happens do not feel tempted to pay fees to debt management companies.


However, for a small minority it may be that your creditors have already resorted to legal action. In which case it may be helpful to be reminded that it is not a crime just to owe money and with certain exceptions you can’t go to prison if you are unable to pay. Your case will normally be heard in the county court which is not a criminal court. The court is not there to punish you but to ensure fairness between the borrower and lender. So don’t be afraid of court action


Winter 2007 37


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