Unemployment and hopes for a V shaped recession
December 30, 2008 | Leave a Comment
In recent months, the financial crisis has made job security for huge swathes of workers a thing of the past. In the months of June to August 2008 (inclusive) there was the biggest increase in unemployment since the middle of the last recession in 19991. It was also highly ominous that there was the biggest slide in the numbers of people in jobs since 1993.
Over this Christmas season we have seen further business closures. The cheapness of goods in the shops leading up to Christmas beg the question, will any more of the familiar retailers in the malls be going into liquidation in the New Year? Nearly 2 million people were unemployed in the U.K last week.
How far will the fingers of unemployment be reaching?
In the build up to Christmas, job losses in the financial, housing and service sectors have been the most obvious to happen. Alongside this it has become clear that economic hardship has taken its toll on the retail outlets as well as manufacturing. Even exporters, who were expected to benefit from the falling value of the pound, have not enjoyed the boost they hoped for as potential buyers abroad cut back on their own expenditure.
How do our unemployment levels compare with abroad?
U.K unemployment is still a lot lower than our competitors abroad with, for example, 5.7% compared to Germany’s 7.3% unemployment. With U.K workers being perceived as more flexible in recent years, this stands the U.K in good stead for recovery. The hope is that we will have a short sharp V shaped (rather than U shaped) recession and will come out of it quickly…. although predicting the outcome of this unique financial crisis is very tricky to do as we are all, globally, in uncharted territory.
Government to underwrite loans to businesses?
December 15, 2008 | Leave a Comment
David Cameron (Conservative leader in the U.K) has, again, commented on the problem of banks being unwilling to lend to businesses in the current economic climate. The problem is that the banks’ fingers have been so badly burned by the credit crunch and resulting financial crisis that they are scared stiff of being caught out again - especially when the full impact of all that has happened in the economy has yet to reveal itself.
Cameron argues that intervention is needed to kick-start the process of lending to businesses and that the only way to give the banks the confidence to do this is for the government to act as guarantors on appropriate business loans thereby taking away the risk from banks.
He has argued that a national loan guarantee was “a massive state intervention to help the banks lend again.” This seems like a great idea…however, with a government up to its neck in debt as a result of spending, taxation and bank bailout decisions, where is the money going to come from if called on for bad debts.
I am with Cameron when he called for “new rules and incentives to create a new culture of responsibility” which need to be enforced by the regulating body. However, it seems like a high risk plan (if recession is leading to the fall of many businesses) for a highly in debt government to act as guarantor to high risk loans.
I know that some risk taking has been necessary to intervene in the economic downturn - but surely it needs to be low risk?
Credit crunch rise insurance claims
December 7, 2008 | Leave a Comment
Why would the credit crunch raise insurance claims?
It is feasible that, in the wake of the credit crunch and the start of a recession that insurance claims will rise. As people planned holidays then find they have either lost thier job or are nolonger able to pay for it using credit, there is potentially a rise in fraudulent travel insurance claims.
The Observer Newspaper recently quoted Direct Line Insurance and the Absolute Fraud Management (AFM) service as expecting a rash of claims from unscrupulous policy holders. Of course, this problem will not only be reflected in people trying to recoup what they have paid on failed holiday plans….a rise in household policy claims as a means for unscrupulous people to raise funds claiming loss of expensive items is also expected.
How will the rise in insurance claims affect customers?
Chris Price at Direct Line added: “It is generally said that during an economic downturn insurers see an increase of fraudulent claims on their books.” As a result, we can expect an increase in the time takes by insurers over legitimate claims as everybody’s insurance claims will be carefully scrutinised and authenticated. Customers seeming vague or nervy in during telephone claims will be expecting a face to face interview…otherwise premiums could end up going sky high to compensate for fraudulant claims.
For the rest of us this may simply mean that we have longer to wait for genuine claims to be settled. The current financial crisis also means that customers are more likely to claim for loss or damage to lower value items making the claims process slow down due to claims volume.
Automobile Industry Affected by Credit Crunch and recession
December 5, 2008 | Leave a Comment
Falling car sales leading to manufacturing cutbacks in the automobile industry
I suppose it stands to reason that as credit becomes less easily available, those big ticket items like new automobiles are going to be one of the first industries to suffer. The credit crunch and recession seem to be feeding off eachother now. In the U.S, the U.K and Australia there have been announcements about cut backs in automobile manufacturing. The result? Redundancies / shorter working hours, less income available to spend in the economy and retail outlets suffer further.
So what is the fallout of cutbacks in the automobile industry (amongst others)?
I don’t know about you but I have really noticed (when out and about) how grim peoples’ expressions are. There is a lot of pressure on most households’ income ….Thanksgiving, Christmas, school recess (an needing to entertain the kids)….all these factors are a pressure financially at the best of times….let alone when credit bills are hitting the doormat and there is uncertainty about how many more paycheks might be coming in if the recession bites hard.
So how do we move forwards from here? When can we feel safe to spend again? Public perception is that the VAT reduction in the U.K is not expected to have much impact on the spending of many households …the main benefit might be on heating bills (but any saving is quickly offset by rising household fuel costs). Banks are enjoying lower interest rates but passing only a fraction of them on to the customers. Everyone is scared.
Well, back to the Christmas preparations…this year it all seems much more balanced…a bit of giving but having the space to remember the reason for the season.
“Woollies” - that great high street institution - in receivership. I can’t believe it!
November 27, 2008 | 1 Comment
I don’t know about you, but I was shocked yesterday by the announcement that Woolworths was going into liquidation with an enormous £385 million of debts that have been prevented from getting any larger and have forced them to look at their options.
Everywhere I went this morning, people were talking about it. Generations have bought their pick and mix and bargain toys there as well as those weird and wonderful household items that you just didn’t seem to be able to find anywhere else. I salute you Woolworths for all that you have been over the years. You will be a sadly missed presence in our town centres!
As the news was announced last night, there were other casualties of the credit crunch fallout looking like they were heading the same way - MFI, Dolcis, Ethel Austin to name but a few AND THIS IS BEFORE CHRISTMAS!!!! If businesses that have weathered out many a recession are going to the wall now, where will it all end as the post Christmas slump in spending comes around.
I don’t know about you but I think the enormity of this global financial crisis is starting to sink in. Yes. I have been watching the news. I know about the extent of the financial crisis. It is the hidden depths of its impact that is starting to reveal itself….and, as I meet people in the North of England who have been laid off from different jobs more than once in the last few months, I don’t think I’m alone in wondering where it will all end.
Can the Credit crunch be reversed by central banks?
November 23, 2008 | Leave a Comment
The last few weeks have seen a whole lot of negotiation by governments with central banks in the hope that the huge cash injections that were eventually forthcoming would avert the worst effects of the credit crunch. Wold leaders have been discussing together how they can work together to save the world from the horror that the subprime crisis has revealed.
How can central banks reduce the impact of the credit crunch?
The federal government and their opposites across the world have been pumping more money into the financial markets in hope that this will allow funds to move more freely so easing the credit crunch. Basically, this allows more banks to borrow more money more cheaply. These lower borrowing rates will also be secured against lower value collateral.
Will the central banks be sucessful in reversing the credit crunch?
What these arguments for federal cash injections into the banking system are ignoring is that the money is being used to try to patch up the injuries to the system caused by bad lending decisions. It now seems unlikely that a major recession can be avoided. I also suspect that inter-bank and bank-customer trust has been so badly impaired that we will never quite go back to the “good old days” of freely available credit quickly supplied. Nor should we.
The economic backdrop in the U.S, the U.K and Europe is appalling and worsening too. Suddenly all the lenders are a bit skittish and yesterday’s good risks for lending are now not looking so good a risk…especially with possible redundancies around the corner as the recession deepens.
This means that, whilst there is already a lot of bad debt out there, there will be more bad debt looming as jobs get lost and spending is cut back. Even other banks will take a long time to look like a good credit risk as nobody seems to know what dark secrets lurk on eachother’s balance sheets. It will take at least a year before that kind of information becomes publically declared and so the decision to lend to other banks can be made based upon transparently declared facts.
Everyone is starting to hoard money ready for any surprises in their own financial affairs…consumers, banks and businesses. I wouldn’t hold your breath that these cash injections are going to be made available to customers too quickly. All the banks have had a major scare and need time to catch their breath, see the impact upon their own financial stability, work out what on earth happened and try not to do it again.
Saving money on fashion (Part 2)
November 12, 2008 | Leave a Comment
In addition to keeping the neutral essentials of your wardrobe (smart jacket, cardigan, jeans, tailored trousers, little black dress etc) in neutral colours, there are ways to save money on fashion whilst getting an up to the minute individual look.
Discounted catwalk looks at the mall.
All the main shops at the mall take their styles and derive them from that season’s best catwalk looks. High fashion items, therefore, do not always need to be with a high price designer price tag. Look around at the mall for high quality seasonal looks to bring your wardrobe up to the minute at budget prices.
Charity shops can save money on fashion
Whilst charity shops generally deal in second hand clothes, many also bring in discount labelled stock that are sold much more cheaply than at the mall. Add to that vintage looks or items that can be adapted (with your sewing machine) and you will soon create a unique statement of the current fashions and the confidence that you will never be in the same clothes as anyone else at an event.
Where possible use cash instead of credit cards to save on fashion
Credit card payments cost huge amounts of money by the time you have paid them off. Also, in times of impending recession, the last thing anyone needs is to increase their debts when job security is uncertain. Many banks are also suddenly reducing peoples’ credit limits….so make sure you can deal with that my not racking up debt.
Payment by cash is a great way to really appreciate what you are spending on an item and to reflect on whether it really is the bargain you thought it was.
Set a monthly clothes budget
That fashion item to cheer us up on an off day (and, lets face it, with the credit crunch and recession a lot of us are having bad days!) can make a real hole in the month’s budget. Despite this, clothes do wear out or get shabby so its not realistic to cut right back on the family clothes budget.
When people enter an Independant Voluntary Financial Arrangement with creditors or, worse still, go bankrupt, the type of budget that is ofetn set for all clothes and shoes is $50 per month per adult and £25 dollars per child. It is possible to be clothed and shod on that budget from discount stores…but not easy. This will help to focus the mind if you feel that your debt levels are too high and you are considering spending a lot of money on a clothing item. Better to save money on fashion now by setting a clothes budget than to face these restrictions if made bankrupt.
It looks like a recession is looming….
November 8, 2008 | Comments Off
<h3>Is recession looming or has recession loomed already?</h3>
They’ve been talking about “Is recession looming?” for the last couple of months. However, anyone running a household and working (or even made unemployed already) could have told these world leaders and their financial advisors that recession has started….let alone looming!
In the malls, on the high street and in the supermarkets, most of us are adapting our spending behaviours. This year, for the first year, my extended family have had a present amnesty at Christmas….ignoring gifts for adults and giving something small to the kids. I don’t think we’re unusual in that respect….we have seized an opportunity to arrest a trend for excess at thanksgiving and christmas and to get back to the roots of the reason for the season. If we’re not unusual though, the shops are going to feel recession soon enough this year.
Its all spin and propaganda from the world leaders. Let’s see what today’s Central Bank interest rates cut yields for borrowers in the U.K….will we all run out spending money to boost the economy for Christmas. I don’t think so. Globally, we are all suffering as a result of decisions made by lenders and commerce. Reductions in oil prices are not being passed down to the consumers so retail prices continue to be elevated by stores.
I personally believe that the changes in behaviour by consumers is going to become a deep seated rather than a transient recession provoked behaviour. We have all learned hard lessons about borrowing, cost of borrowing and cost of living….it will become part of the psyche of a generation.
Credit Card Debt - Are You Risking Bankruptcy?
November 2, 2008 | Leave a Comment
Why do people use credit cards at a level to risk bankruptcy?
Credit card debt is one of the main reasons why private individuals end up in bankruptcy. Coupled with the negative equity many homeowners now have during the credit crunch and recession, risks of bankruptcy are running higher than ever. Temptation towards excessive use or credit cards can be high as household bills soar and the money needs to come from somewhere to pay the mortgage and the bills. In times of despondancy during recession, retail therapy is also a common behaviour racking up further credit card debt. Debt resolution becomes an increasing concern.
How might using credit cards in this way lead to bankruptcy?
It is not a real solution, though, as excessive borrowing on credit - often from multiple lenders- makes more room for error on remembering repayments on time as well as keeping track of just how much those debts are costing you each month in total. Before long, it is common to find that the expense of those credit card bills is exceeding that of the household bills you were struggling with. Where will the money come from then? More debt means one step closer to bankruptcy.
How can I use credit cards wisely then?
It is always best to keep to a maximum of 2 to 3 credit cards. This is part of good financial management enabling easy monitoring of debt levels and not having so many payment deadlines in a month that you might forget some.
The main reason for bankruptcy in America and the U.K. is credit card debt. Households have developed the habit of paying off household expenses using credit cards day by day instead of using cash or checks.
As the credit crunch and recession start to bite deep, those with existing credit cards are relying on using credit to pay for food and heat and light. Essentially they are paying for these things with money that they do not have coming in….eventually the credit train will hit the buffers if this behaviour does not change and bankruptcy will inevitably follow.
How can credit card behaviours be changed?
There is little doubt that the media and company advertisers try to make out that we are old fashioned or something is wrong if people don’t use plastic (credit cards) instead of cash or checks. Never underestimate the power of advertising! Infact it is those paying with money that they actually have that will have the last laugh as they understand just how far that money will stretch each month and adjust their spending choices accordingly.
It takes nerves of steel to change deeply ingrained spending habits. Credit card statements show what you have available to spend before what you owe on your statement. Similarly, bank teller machines often state what you have available to spend instead of the actual amount in the bank plus the overdraft available to you should you choose to borrow on it.
Communication of information in this way leads people to behave as if they actually have the money that is available to them instead of it being available to them to borrow. It makes the lenders and credit cards companies richer whilst leading the borrower one step closer to the bankruptcy courts.
Remember, as the the level of your credit card uses takes you closer and closer to only making the minimum payment on you card statements each month, the time it will take to pay it all off will extend hugely. With a credit card debt of $5K, it will take 382 months to pay off your debt with the minimum repayment each month (assuming no further use of the card in the meantime. Meanwhile, that debt is costing you $7,300 in interest alone making a total to repay of $12,300 for $5000 debt.
Suddenly we start to see how that $150 pair of shoes you fancy treating yourself to on your credit card will ultimately cost you a total of $369 by the time you have paid off the interest of $219 (at current rates on them) over nearly 32 years. Suddenly they sound less appealing don’t they? They sure must be comfy to spend that much…yet across the land, people are making similar spending decisions daily that are leaving them in bondage to debt!
So what about the future of credit cards in the current economic climate?
Nobody could fail to notice the struggle that our economy is facing. With redundancies increasing, real estate prices falling and household bills rising it is imperative to get you financial house in order before there is a sudden change in you life circumstances that could lead you towards bankruptcy.
- If at all possible, in the current climate, change high interest credit cards into lower interest cards….this will increase the debt busting power of your dollar.
- Try to double the minumum credit card payment each month to really start clearing that debt.
- Avoid using your credit cards when at all possible. Leave them at home so you have to return for it in order to use it. In that cooling off period you may decide you did not really need to make the purchase after all.
- Do not use your credit card for household bills or food purchases.
- If you really are in debt too deep to get out on your own, go for debt counselling and make sure that you stick to the budget they set for you otherwise you will be heading straight to the bankruptcy courts.
If you really can’t face sitting down with a stranger and going through your financial situation, there are packages available for debt resolution that will help you to develop your own strategy to get out of debt in 3 - 5 years….completely….now that sound better than nearly 32 years the way things are looking now doesn’t it? This resource pack for eliminating debt is entirely legal and workable without needing to involve anyone else except your creditors themselves. Click on the link to find out more.
Low cost beauty tips
October 30, 2008 | Leave a Comment
As recession and job insecurity start to hit many households, paying lots of money for beauty products becomes lower priority as many households struggle to pay core bills.
However, help is at hand. Compromising on price of products does not mean that we nolonger look after ourselves and our bodies….her are a few tips to save money on some beauty treatments clearing the funds for those indispensible beauty products.
Water….the cheap way of achieving glowing skin
Dehydration leads to dry and flaky skin. We’ve all heard how we should aim to drink 8 glasses of water per day….not only does it help our concentration but it will also give you a glowing complexion.
Milk….good enough for Cleopatra…great for our skin too
If you have too much milk left in the fridge and you want a treat before it goes sour, add a cup full of milk to you bath for a natural moisturising treat.
Give natural moisture back to your hair
Hot water strips your hair of moisture. Not for the feint hearted in the winter months, but great for shiny locks…..use luke warm water to wash your hair then finish with a cold rinse to seal the hair’s cuticles and keep in the hair’s natural moisture.
Lemon aid for stained nails and fingers
If you have used a lemon for cooking, take the skin and rub it over your finger nails and finger tips. It will remove any unsightly stains and leave your nails and fingers cleaner and brighter.
Blasting hot and cold?
Taking the time to do blasts of alternating hot and cold water in the shower doeas wonders to boost blood and lymph circulation and is even claimed to ward off cellulite. It doesn’t matter whether you start or finish on a hot or cold blast…its the alternating that dilates blood and lymph vessels and get everything moving.