Covid and beating debt . . . .
THERE are evolutionary moments in life . . . when you are in secondary school thinking how easy it would be to sit back in your primary school desk; when you look at how complicated life is as a house owner, and how A-levels were actually a doddle; when you realise how debt just makes things complicated, how much it can control you, and that feeding one person was easy.
The trodden road of financial ‘evolution', and the realisation of its impact on our time and energy is no harder felt than on January's first pay cheque, when, in reality, it's going to be gobbled up by a credit card bill.
I've covered the psychology of debt before, and how thinking of purchases as an exchange of time (ie a £40 shirt might be five hours of gross earning) rather than the fickleness of a promissory note (ie money - I promise to pay the bearer) is a better discipline to control spending.
However, the lure and disconnection between cost and value, has never been so wide, especially give the tap and go ease of purchase.
Today, the households with less than £1,500 savings would fill Wembley stadium each day from now until the 10th of September. More than 12.8 million people do not have access to that small amount of cash.
Debt per household is a staggering £60,363, and there are 4.8 million households without at least one essential household appliance (like fridges etc).
The average credit card debt is £2,595, and the average credit card interest rate is 20.77 per cent, meaning they are paying £536 more per year in interest than the Bank of England base rate.
Household debt (forecasted pre-covid-19) is set to rise to £2.425 trillion in 2023-24.
Debt slams one of the key nine emotional needs in Human givens therapy - security.
If the fundamental basic requirements of ‘security' – a safe territory and environment which allows us to develop fully – aren't met, this can create paralysis, a freezing of the mind, of goals and the ability to think clearly, let alone the remaining eight emotional needs of the human givens institute.
For those living hand to mouth, the credit card is one of the last options to feed the family, or give them hope.
For others, the key is to decide what ‘necessity' is, and push back on that temptation of expenditure where possible.
What you do know from the above is, you are not on your own. This is very common.
If you do have such debt, creating a CAP strategy of 'Containing' expenditure, 'Accepting' where you are, and 'Planning' a programme to exit, will fill you with a sense of purpose to put you back in control of your finances and indeed life.
On planning, consider moving to zero interest rate credit cards to give you space away from high interest rates.
Whilst options have reduced from 125 balance transfer options in 2017 to 70 today, there are still numerous options available. TSB Platinum, for example, has a 30 month zero rate interest rate policy on the balance transfer, but it comes with a 2.95 per cent fee. Halifax has a 1 per cent fee and a 25 month zero interest rate policy.
Other options are available on the excellent comparison site Moneyfacts.
If you are unable to balance transfer like this, consider writing to your credit card company and asking for an interest rate decrease. They are obliged to deal with persistent debt responsibly, and can freeze rates or reduce them.
If the rate offered is higher than a mortgage rate, ask your lender about a further advance. Borrowing today at 0.64 per cent rather than 20 per cent, would mean that keeping payments the same, your debt would disappear in five years from now.
If these options are exhausted, have a look on www.moneyadviceservice.org.uk where you can find out more about the free debt services provided by PayPlan, StepChange, Debt Advisory Foundation, National Debtline and the Citizens Advice.
But remember v- any movement in you, no matter how small, towards improvement, is stronger than any storm you will face, as it's an expression of hope, of desire and of your control.
So make the call.
:: Peter McGahan is chief executive of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. If you would like mortgage advice, call Darren McKeever on 028 6863 2692, email firstname.lastname@example.org or visit www.wwfp.net.