Two weeks ago I got an email from someone in financial problems asking for specific advice in regards to their relationship. She explained to me that she has been keeping her debt from her partner as they have separate credit cards and asked my advice.
I’m very flattered for the email, but would like to recommend anyone with debt problems to seek professional advice. I’d like to offer you this response, however, which is my personal view.
I would never lie to my partner about debt, as sooner or later he would find out anyway. We share the post, share the bills and share the cost – so lying wouldn’t solve anything. However, it is more of an issue when we lie to our families about how we feel about the debt. Many of us cover the situation up by claiming the debt is manageable or you have it ”all worked out”. In reality, we’re hurting deep down and anxious to find a way of gaining money we haven’t got. Covering such problems up really doesn’t help, as those who care for you cannot help you if they aren’t aware of your troubles. There is a potential for strained family relationships when your debts force you to borrow money from those around you, even though you’re not sure when or if you can pay them back on time. Therefore, debt can harm family relationships if the problem is covered up or hidden.
I hope my perspective has been helpful, and if you do have debt problems, I can’t stress enough, seeking debt advice and communnicating about your debt is the best way forward. I’ve found these debt FAQs really helpful for answering some of my common questions about debt solutions.
November 23, 2009
Credit cards are a tricky subject. I don’t want to encourage anyone to spend dangerously on their credit cards or to spend above their means, but I also think it’s good to discuss how to use a credit card in a smart way to actually help control your finances.
First of all avoid the worst way to use your credit card – long term borrowing. If you need a loan it will almost always be cheaper to get it from a bank, especially if you are a home owner. Another method you could consider is your overdraft facility. A friend of mine has a particularly good deal with his bank that works out for him cheaper than a credit card for those small purchases. He finds the charges smaller for his spending needs.
But, assuming you won’t borrow any money for longer than a month or so, there are a lot of benefits to having a credit card. Indeed some goods and services, such as hire cars, are very hard to get without one.
This is because of the extra insurance and guarantees that your card provider gives you. Using your credit card for an expensive purchase can be worth it – I know someone who got £100 back after he broke a new camera. Even though he admitted he was at fault he was still partially covered. It is worth finding out what you are entitled to from your card.
Many credit cards also offer cashback or bonus schemes. So long as you use them for spending you would be doing anyway this can be a great saving – sometimes as much as 3% or 4%!
Basically credit cards can be great products if used right. Credit cards should never be used for credit! Use credit cards the smart way.
November 19, 2009
It is so easy to get into debt, but not as easy to get out of it. The best solution is of course never getting into debt in the first place. Here’s my advice on how to scrape those pennies together if money’s a bit tight to avoid the debt cycle.
The first thing you need to do is set a realistic household budget. List all things you have to spend money on i.e. Gas – Electric, mortgage, then list all the things you want to spend money on. The goal is to separate between ‘Need’ and ‘Want’ for example you ‘need’ to eat or you ‘want’ that new CD. I would also thoroughly recommend using an online money management program to track your spending and help you get a bigger picture of your finances. Read my post on Kublax if you’d like more information.
The idea is to look at you outgoings and see where you can make cut backs, set yourself a shopping budget for food. Some examples of how to save money on groceries and household bills are as follows:
1. Ask your supermarket what time they mark down there products, and purchase these when they are cheaper. Most things can be frozen to restore the sell by date.
2. Grow your own vegetables and fruit allot cheaper than buying.
3. Use price comparisons sites to check you are not paying to much for your gas – electric or mortgage.
4. Check with your energy supplier to see if you have an economy setting, do you washing etc in the evening as it is cheaper.
5. Take a shower instead of a bath, its cheaper.
6. Do you really need the heating on? Can you just put on another layer of clothing?
7. Hang clothes to dry on a rainy day indoors over the bath or use a clothes airer, it’s cheaper than the tumble dryer or radiators.
8. Use natural products for cleaning its cheaper and better for your health!! eg. Vinegar for cleaning windows.
Overall just think about ways to do things on the cheap. Research is rewarding and you will be saving money and getting out of debt. I’m always reading brilliant blogs on frugality such as Almost Frugal.
As my wise mother told me as a kid – If you look after the pennies, the pounds will loook after themselves.
November 6, 2009
Are your money management skills effected by your upbringing? As with anything, the best way to learn — for people of any age — is through hands-on experience; I believe the best way for kids to learn how to manage their own money is by letting them taking control of it.
This doesn’t necessarily mean giving your child the rights to their university fund before they are ready, or even letting them take money when they want – as this would no doubt start a bad habit that is very likely to lead them into debt. Instead a good idea would be to set up a child account with a bank such as Nationwide or HSBC that gives the child a card to use with their account (a debit card, of course) with a monthly limit on how much they spend. This way they can see their savings grow over time – if they choose to save that is. Pocket money can even be added to this account monthly by standing order straight from your account.
As for schools, It is my personal opinion that ‘citizenship’ and the such should be kept out of schools as it interferes with the teaching of traditional subjects. However an introduction to Economics for children to young to study it may help the country out of the financial grave it is digging in future generations.
If you’ve got an opinion about ways to teach kids to save, let MoneyStand know. From my experience, frugality, managing money and money saving is something valuable to learn as a child, and I’d love to hear your thoughts!
November 1, 2009
At MoneyStand, we frequently talk about debt solutions to offer some advice to anyone landing on the blog looking for some support and advice. Judging by UK debt news, theres been some increases in the amount of people getting IVAs, so this week I’m going to talk about Individual Voluntary Arrangements. An Individual Voluntary Arrangement, or IVA is a formal agreement with your creditors to pay some or all of your debts. An IVA will normally last five years, after which you will be debt free as a large proportion of your debt may be written off.
IVAs offer a number of advantages over bankruptcy. You will probably be allowed to keep your home, you can keep the matter private rather than having it announced in a newspaper, you can still hold a current account (albeit one without an overdraft) and you can still act as the Managing Director of a company or hold a public office. This means that the stigma of IVAs is much less than that of bankruptcy.
However there are also a number of disadvantages. Firstly, an IVA is only an option if you owe more than £15,000, and creditors representing at least 75% of the amount you owe must agree to the IVA arrangements. If your IVA fails you may still be made bankrupt, and the cost of your IVA will be added to your debts. Finally, your finances will be heavily scrutinised by an Insolvency Practitioner, and your IVA will appear on your credit file, thus affecting any subsequent applications for any type of credit.
October 27, 2009
Here’s an interesting thought that a friend of mine got into my head over the weekend: Can you use a credit card to actually make some money?
From my experience, by owning a credit card you are probably going to spend more money then you would have usually spent, just because it is all too easy to buy something on your card and not worry about the price. You don’t physically hand the money over, and you think that you will have ages to pay if off, so you don’t really care so much.
However, a friend of mine recently told me about a credit card they have which is a 0% interest on purchases one. This means that she can buy things on the card, and then doesn’t have to pay the bill until the end of the month – at no extra interest. Her reasoning on ‘making money’ this way is that she can put the money that she would have spent into a savings account – earning interest on money that would have been spent. According to her, you can easily earn a few hundred pounds a year simply by using credit cards this way.
Another way of using a credit card that could be considered is by applying for a cashback credit card – then you simply get paid to spend on your card. So if you spend £1000 on your card say, you might earn 5% cashback – which is about £50. This cashback is money that you wouldn’t have earned if you paid by cash, so it’s a bonus really. However, as the age old saying goes “there’s no such thing as a free lunch” so always investigate your options throughly when looking for a new credit card, and only spend what you can pay off within a reasonable time frame.
October 21, 2009
It seems our post in July about Debt and relationships has sparked a few conversations! Here’s another guest post this week from someone who was inspired to write in after reading a post from another. If you want to write us a post and have your opinion on a debt topic heard, get in contact with MoneyStand.
I would never lie about anything to a partner, as I believe that a relationship should be based on honesty. Fortunately, I was brought up with the attitude that debt is something to be avoided. Sadly, with today’s attitude of instant gratification, debt threatens the relationships of many couples, especially if both partners are not jointly responsible for getting into the situation.
A former partner, however, did have a habit of spending in secret, as they knew that I would be upset to know they were wasting such large amounts when we could not afford it. Finding the credit card bills, and knowing that these had to be paid for, caused numerous arguments, as I was concerned that our budget could not cover this expenditure.
Concealing financial problems is understandable, but secrets have a way of emerging, and a partner may well be more upset if the facts are kept from them. Anyone in debt would be well advised to be honest about it; of course the initial response may be anger, but they may find that the partner is more understanding than they expected, and will work with them to find a solution to the problem.
October 12, 2009
The first and most important step in getting out of debt is to admit that you have a problem, and to realise that it is really nothing to be ashamed of. There are thousands of others in the same boat, many of whom are too ashamed to admit to being in debt.
Websites like MoneySavingExpert.com can be invaluable in helping you to face the truth and start to take steps to turn your finances around, as well as having many members in the same position who can support and advise you on what to do next. The very first thing to do is to draw up a statement of your assets, where you detail your income and every single expenditure each month – not just your mortgage and bills, but things like money you put aside to pay your TV licence, or for holidays and treats etc. Once you have a realistic statement you are in a better position to see where you can make savings and see what spare cash you have each month to put towards reducing your debts.
Speaking to advisors at the Citizens Advice Bureau can also be very useful, as is the Consumer Credit Counselling Service (cccs.co.uk), who can give the best advice on bankruptcy, IVAs (Individual Voluntary Arrangement) and Debt Management Plans and help you to contact your creditors to arrangement affordable payment plans if necessary.
It takes time, effort and a whole lot of commitment, but the hard work is well worth it when you can finally see the light at the end of your debt tunnel.
- Remember to TALK about your debt!
October 6, 2009
Each week I read a vast amount on blogs about debt, investing, saving money and there’s always a special few that are too good to be kept a secret. Now that October is upon us it’s time for me to check back on my personal finance bookmarks and choose a few to share with anyone stopping by at Money Stand. Here’s my favourite blog posts from around the net that were published in September:
1. Execellent Post at GenX Finance on saving money by doing your own home maintenance. This is great advice and a very comprehensive list.
2. Such a great idea which I will personally be taking on board is this post from Growing Money about getting money back from those who have borrowed from you. I’ve lent out more money than I care to remember and it’s so difficult to ask for it back.
3. I came across this post on Debt Kid yesterday which is really how to acheive debt free living in a nutshell. It covers the three main points I always talk about on MoneyStand and is really well written.
4. Over at Debt Management Tips they wrote an article at the start of the month about tackling student debt. If you’re a recent graduate like myself, it’s worth a good read.
5. If you’re considering buying your own home or trying to find out about mortgages, read this inciteful article about how to pay off a 30 year mortgage in 15 years at Consumerism Commentary.
If you missed these posts and any of them interest you, I thoroughly recommend you take the time to have a read!
October 1, 2009
What is an IVA? An IVA is an Individual Voluntary Arrangement which gives you the facility to set up a formal agreed payment plan with your creditors. In order to be eligible you must have debts of over £15000 that you cannot afford the repayments on.
What is Bankruptcy? Bankruptcy is an order from a court that means your finances are controlled by the Official Receiver and there are a series of things you cannot do when you have been made bankrupt. This also means your bank account will be frozen and you will likely lose your home (if you’re a home-owner)
What debt solution is better for you? That’s a tough call that only you can make with the help of some serious debt advice. Overall an IVA seems to offer you much more freedom in having some control over your assets, in my humble opinion (but I’m no financial advisor). When you are bankrupt you can be made to hand over everything that is not deemed essential to your living (eg work items or household items like clothes). With an IVA you can still operate your bank account and have your wages paid in as normal. You still have to provide detailed information on all your income and expenditure and then you will be told how much you have to repay to your creditors. If you do not keep up with this you could be subject to bankruptcy proceedings.
The time in which you will be paying the debt back does vary between these two. The IVA is usually over 5 years whereas the bankruptcy order means you will usually be paying the debt for 3 years (although the bankruptcy order may only last one year, the agreement to pay is 3 years). Although you will be paying for less time with the bankruptcy order, it does affect you for longer as you can not be company director, Managing Director, MP or Judge and you will have severe difficulty in obtaining a mortgage (especially after the sub prime credit crisis in America).
So overall, if you can have an IVA over a bankruptcy order then this would seem the better option for the majority of circumstances but this depends largely on your debt.
September 30, 2009
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