In Focus Commercial Credit
But are there comparisons with the 2008
financial crisis? How did UK consumers cope with the shocks of this down turn and were there any effects? Is there a consumer profile of the people
who were left standing in the debt Colosseum arena following the crisis? How did they survive? What lessons can we learn from the way credit was used and the parameters within which it was given?
Study In a study which investigated the implications of psychological well-being, physical health and life satisfaction and the impact of the 2008 financial crisis on consumer credit debt, secondary data was gathered from the British Household Panel Survey, with the sample consisting of 1,005 household heads who all responded in four years (2006/07/10/11). The relationship between well-being,
life satisfaction, health implications and financial incapability pre- and post-financial crash were compared. The findings revealed that financial
incapability was strongly related to poor psychological well-being and has a negative relationship to satisfaction with life, which was higher before the financial crash than after, whereas poor health was lower before than after.
‘Financially incapable’ means a condition
in which a person is unable to manage financial resources of the person effectively for reasons including, but not limited to, mental illness, mental retardation, physical illness or disability, chronic use of drugs or controlled substances, chronic intoxication, confinement, detention by a foreign power or disappearance. ‘Manage financial resources’ means those
actions necessary to obtain, administer and dispose of real and personal property, intangible property, business property, benefits and income. The study found there to be links between
indebtedness, poorer classes of people in the UK and psychological well-being and concluded that these individuals were one of the most at-risk groups for experiencing poor mental health post- financial crisis. However, the potential relationship
between the financial crisis, consumer credit debt and individual well-being is an aspect of the financial crisis often overlooked within the financial services industry, and it is inevitable that the current COVOD-19 crisis, and the financial stressors which this brings, will expose similar problems.
Financial capability Financial capability is not correlated with
income and this is a common theme derived from the study, however people in Britain require financial management skills to be in control of their money, regardless of how much money they have. Although financial management is
important at any time, in the current economic forecasted Covid-19 downturn reaching a wide section of the population is even more vital. The financial strain of Covid-19 job cuts
and employment uncertainty is likely to see an increasing number of people finding themselves in difficult financial situations.
Conclusion The findings of this study make a significant contribution to research and practice as they highlight how well-being factors known to be affected by consumer debt interacted with financial incapability in the context of the financial crisis. More specifically, the findings of this
study contribute to the argument that improving the financial capability of people in the UK can improve their general and psychological well-being and, in so doing, adds weight to the case to develop public policies which improve the financial capability of citizens and thus support psychological well-being, health and life satisfaction. CCR
July 2020
www.CCRMagazine.com
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