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by Paul Gailey on February 3rd, 2011
Game over for debt? – Far from it.
This enchanting presentation of a serious problem depicts national debt like you have never seen before.
All supporting data for this film is available in a comprehensive spreadsheet: http://bit.ly/debtris
No prizes for guessing the original game that has inspired this. We salute you: informationisbeautiful.net
by Andrew_F_Smith on February 2nd, 2011
Unemployed people who have sought ClearDebt’s advice in the last year have seen their average unsecured debt to take home pay ratio rise sharply in the last year.
In 2009 unemployed people’s average debt stood at 271% of take home pay but, in 2010, it rose to 314%. This is based on a sample of 59,111 of whom 5,059 were unemployed. Retired people were the only other occupational group where the debt to income ratio got worse last year, rising from 252% to 271% (Our sample of retired enquirers is much smaller – only 808 individuals).
Across all occupational groups debt/income has got easier in the last 5 years. In 2005, the average enquirer owed, in unsecured debt only (ie, excluding the mortgage) 199% of their annual take home pay. In 2010 this figure had reduced to 148%. Even amongst unemployed people (and despite last years sharp rise in debt to income ratio), the situation is less bleak now than in 2005, when they owed an average of 327% of take home income in unsecured debt.
The situation is easiest for employed people – who have seen a steady easing in debt to income from 176% of take home pay in 2005 to 120% in 2010. The self employed too have seen their debt to income ratio drop (2005: 247% – 2010: 191%) but are substantially more indebted than those who work for someone else. My advisor colleagues tell me, anecdotally, that the habit of financing their business needs from personal credit cards and loans is one the self-employed find it impossible to give up. Self-employed debt to income did not drop in the last year which may indicate some are finding times tough.
The proportion of our debt enquirers that are unemployed is consistently a few per cent ahead of the proportion one would expect when compared with the UK’s unemployment rate – which is probably no great surprise. I think the sharp rise in debt to income ratio in this group should worry people in government because it also comes at a time when unemployment has risen sharply and looks set to continue marching upward. The chickens may not come home to roost until these people find jobs again but, if and when they do, they are going to be entering employment with a debt burden they will find difficult to service and in sufficient numbers, I guess, to have an impact on any growth we are expecting to come from consumer spending. New and effective debt resolution procedures could make a big difference here.
by Paul Gailey on February 1st, 2011
Mike Morgan is a senior debt advisor at ClearDebt, and was the first debt advisor in the UK to gain a BTEC level 3 qualification on debt resolution.
This video of Mike dates from 2009, but nonetheless contains some fine debt advice and also offers an insider’s view of the debt resolution industry.
Mike is a valued contributor to debt forums across the internet and is also available to answer questions from anyone on ClearDebt’s Community pages:
by Andrew_F_Smith on January 31st, 2011
It’s regrettable (but inevitable) that most of the coverage about the OFT’s latest announcement on action they are taking against some fee-charging debt management companies implies that the whole industry is in a terrible state. In fact, it is a major step forward in creating an industry consumers can trust – and it’s a process which the industry is working hard to bring to fruition – quickly.
Speaking as a director of ClearDebt (a fee-charging debt resolution firm – and proud of it) -and as spokesperson for one of the industry’s two trade associations (Debt Resolution Forum) I believe that what the OFT is doing, a fee-charging debt resolution industry, which consumers and creditors can trust is going to be needed.
The OFT’s action has driven out a number of dilettantes and those who can’t be bothered to accept a burden of regulation. It seems to have found a number of rogues too and is dealing with them.
The industry itself is shaping up – fast. First, the OFT’s requirement for an audit of compliance was historic – in most case it related to trading standards reviews made between autumn 2009 and spring 2010 and, for many firms, their response to the OFT was confirmatory – the changes required had already been made.
Secondly, there is real commitment, from a large section of the industry, to all the regulation that’s necessary to remove consumer detriment. Debt Resolution Forum (DRF) offers an advanced BTEC (the Certificate in Debt Resolution – CertDR) requiring more than 210 hours study and with three examinations: Members have to commit to their client facing staff either taking this or being trained to an equivalent standard. All our staff who deal with clients have to obtain this qualification.
DRF also requires members to go through an annual independent audit from the Insolvency Practitioner’s Association (a regulator trusted by government). This is a five day process in the first year (three days in years two and three – and then back to the five day review).
DRF has an independent complaints panel with a majority of members from outside the industry. chaired by David Hawkes, National Money Advice Co-ordinator of Advice UK. The complaints’ panel’s decisions are binding on members.
It’s early days for both these initiatives but the commitment is there.
And the OFT will continue to challenge us: We’ll shortly see a consultation on new debt management guidance that will raise the bar further.
Why bother though, with all the free advice that’s available. Well first, free advice is not always best advice (but I recognise that I would say that – wouldn’t I). More to the point, the free sector has a capacity issue, they themselves say they could only deal with half the enquiries they received. Now, after Citizen’s Advice’s announcement of up to 900 redundancies, their capacity is slashed.
Then, the government’s attitude is changing. “Free” debt advice is often taxpayer funded – so not free at all. And many debtors can actually afford the fees they pay – as can (and perhaps should) their creditors. Most creditors factor the cost of defaulters into each product when they design it. So any debt recovery the banks and credit card companies make is actually bunts. Why not squeeze their margins a little and get them to share, with the debtors, the cost of debt advice and resolution? This does seem signposted by the Department of Business Innovation and Skills/Treasury call for evidence on credit and debt regulation.
So – what we are seeing is the rapid evolution of an industry sector from unregulated and seen as unhelpful to consumers to well-regulated and a required part of the UK economic scene. After all, we have an economy partly fuelled by consumer spending and you need credit to spend (nobody saves anymore). More credit means more debt.
Seems, in people’s financial lives, there is nothing certain except debt and taxes.
Links to other comments:
ps. On a related note, if you are interested in checking the license of a debt management firm, ClearDebt have made a screencast showing you exactly how to do so.
by Nazma Noor on January 28th, 2011
Just when you’re starting to recover from the extra money you spent at Christmas, along comes Valentine’s Day, which for many is another pressure to spend money that you don’t have. So what are your options if you don’t want to overspend this Valentine’s Day?
Well the obvious answer to is to ignore the fact that it’s Valentine’s Day altogether, treat it as a normal day and carry on as you were. However this is easier said than done, especially when everywhere you look you are reminded about it, shop windows, restaurants announcing their Valentine’s Day menus, people talking about it and perhaps worst of all, the thought that you might end up disappointing your partner.
If ignoring the day altogether is comepletly out of the question, why not plan a Valentine’s evening in? There’s no rule which says that you must eat out at a restaurant to celebrate, with a bit of imagination you can create a romantic atmoshpere in your own home. It’s a much cheaper alternative to eating out and if cooking isn’t your forte many of the supermarkets have Valentine’s Day meal deals which are very popular.
Budget gifts can always be a bit tricky because you don’t want to give a gift that looks very obviously cheap. Getting creative and making a gift is a nice idea, but if you’re anything like me, the items I make never quite turn out how they’re supposed to – no matter how carefully I copy the youtube tutorial video! That’s why I’d say honesty is the best policy, as un-romantic as it may sound, telling your partner that you can’t afford a big Valentine’s Day present this year is better than having them expect an amazing gift and being disappointed with your actual gift.
Personally, for the past few years I’ve told my other half to buy my Valentine’s Day box of chocolates AFTER the day itself when all the shops have reduced the prices!
Some may say the singletons are the lucky ones on Valentine’s Day, with no need to buy a gift, or spend their money to treat someone else. However I’m pretty sure a lot of single people would disagree with this! Avoid the pitfalls of treating yourself to a gift that you really don’t need just because everyone else seems to be buying.
Will you be cutting back this year for Valentine’s Day? Vote in our poll now and if you have any tips for celebrating Valentine’s Day on a budget leave a comment and share your views!
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