Loans Scotland

According to the government 2012 will be a year of plenty with the golden shower of the Olympic Games to sustain us; but not everyone is quite so sanguine with fool.co.uk leading the chorus of doomsayers who believe that life could get very hard for people living in the UK.

Lets not discuss the cost of the Olympics which is bound to grow beyond its already gargantuan 10 billion sterling and lets not quibble over the supposedly huge tourism benefits which I personally doubt. Sure it put Atlanta on the map back in 84 but wasn’t Atlanta alredy putting itself on the map by reinventing itself as a new style Southern town. In the case of London it is already an enormous tourism destination and is unlikely to grown any more. Look at other Olympics cities and you realise that they simply get left with a portfolio of oversized venues that nobody really wants to use.

The Fool have a come up with a list of depressing predictions about what the UK will look like in 2012 as far as personal finance is concerned that is enough to make anybody want to emigrate (by 2012 the imploding Spanish property market will have bottomed out so there might be a place to start)

1. The average house will be worth £13,000 less in 2012 than today
2.  Seven out of ten credit applications will be rejected
3. House Price to Earnings ratio will improve for the first time since 1995
4. Pensioners will be worse off in 2012 than in 1980
5. Households face an £8,000 shortfall in their family budget in 2012

So the good news is that P/E for housebuyers will have improved: the bad news for houseowners is that is because houses will have fallen in value over the next five years. Points 4 and 5 are certainly the most distressing in real terms since we are talking about the potential impact that inflation and the ravening jaws of government taxation will have on our purse!

Is this a worse case scenario? Quite probably not as some commentators are suggesting in hushed tones that the UK will stagnate for ten years as the reality of global shifts become more apparent to our economy. Notably the move from Europe to the East which is only just beginning to consume and where savings ratios are very high. If that trend continues then when recession does come we can expect our economy to sink further and faster than elsewhere.

With the savings ratio at an all time low, and more and more people struggling to balance bills at the end of the month, the government is asking what is to be done to improve people’s management of their finances.

Proposals to integrate financial education into secondary schools sounds far too little - a question of violin playing while Rome burns. Furthermore it will have no impact upon the millions of adults who have this problem now. Free financial advice lines from the government might do a little, but are more likely to be used by people in crisis and not as the basis for fundamental design of people’s financial planning.

Perhaps a more radical solution might be to not allow financial companies to extend credit willy nilly to anybody who approaches them since it is abuse of credit that seems to cause the most problems. Once a consumer is on the credit mill just about everything else disappears out of sight such as pension planning and planning for the future.

At the heart of the problem is the nation’s addiction to satisfaction now whatever the cost and a belief that owning a house will solve any problem. Looking at the US housing market implode this year is a timely reminder that housing is not a financial services product and that a balanced portfolio is still the best solution to long term planning.

1.7 million people had debt problems in 2006/07 according to charity Citizens Advice, this shows that not only the US has a credit problem

It’s scary how much debt people on average are getting themselves into and of course, debt levels vary widely across the UK. So here are a few easy tests to see how far down the debt path you really are:

1. Wages spent before the end of the month?

Learning not to spend more than you earn each month can take time especially if you have racked up several credit cards over the years. The first lesson is don’t spend more than what you earn. Don’t be tempted to always buy now, sometimes the best things are worth waiting (saving) for!

2. Using your Credit Card for Christmas?

So maybe this year is a good year to set a proper budget for each person you have to buy for. Don’t be tempted to go shopping without a list of people you have to buy for. There are also some great deals on 0% transfers so make sure you are taking advantage of them.

3. Paying your bills using credit cards

It’s quiet worrying how many people have paid their mortgage using a credit card. Your mortgage should be the first thing you pay each month, not the last. Its an extremely expensive way to pay for your home and also in many cases can be a slippery slope that’s difficult to get out of.

4. Repay more than the minimum

Paying the minimum repayment on your credit card could mean you pay your mortgage of before your credit card. It is a always a good idea to try and clear off your credit card each month.

5. No savings?

Live today, forget about tomorrow is not a good approach if you want to retire. One thing is for sure the cost of living will continue to rise. The sooner you start saving the bigger the benefit especially with compound and interest.

Firms that offer IVAs in England and Scotland are considering withdrawing services that help citizens set up IVAs. Financial services companies are increasingly unhappy about paying upfront fees and also want to restrict IVAs from becoming an easy option for debt-laden consumers. For creditors, an IVA can mean only recovering 30% of outstanding debt so they have an interest in ensuring that only really insolvent consumers can access them.

As personal debt continues to rise along with personal bankruptcy, it will be interesting to see how this market continues to shake out.