FOOL'S EYE VIEW
Ten Reasons To Fear The Future!

By Cliff D'Arcy
September 1, 2005

At times, life appears to be a never-ending series of challenges to overcome and hazards to avoid. Still, as an eternal optimist, I think that's no bad thing, because at least these trials keep us on our toes and, to be honest, most Brits have a great deal to be thankful for! However, the UK is sometimes said to be a nation of worriers, so I'd like to try to put some financial fears to rest. Here are ten everyday financial problems that affect almost every one of us, plus suggestions on how to defeat them.

1. Our debt burden has exploded!

In April 1997, just before this government took office, we owed £417 billion to mortgage lenders and a further £80 billion in other debts (loans, credit cards and so on). As at July 2005, these figures have reached £924 billion and £190 billion respectively, so our total debt has risen by £617 billion in 8¼ years. During the largest borrowing binge in British history, our debt burden has grown at an annual rate of more than a tenth (10%).

Sadly, wages have risen less spectacularly, so debt repayments and interest now swallow a considerable slice of our income. In fact, despite historically low interest rates, this explosion in debt means that we now pay more interest to lenders than we've ever paid before. Credit cards, in particular, are WMDs (Weapons of Money Destruction), as this article shows!

What should you do? Transfer interest-bearing debts to a 0% credit card or find a cheap personal loan, plus cut your mortgage interest bill by remortgaging.

2. Rising unemployment means greater job insecurity!

According to the benchmark ILO (International Labour Organization) measure of unemployment, Britain's unemployment rate, at 4.7%, is among the lowest in the world. Then again, although 28.6 million people are working, over 1.4 million people are registered as out of work - and being jobless puts great pressure on their household finances. What's more, the number of people out of work and claiming benefits has increased for six months in a row, which, worryingly, is the longest losing streak since 1992.

What should you do? Read What To Do When Redundancy Hits, build up an emergency fund to tide you over the lean times, or look into buying specialised insurance.

3. Our household bills are rising fast!

According to the one government measure, inflation (rising prices) is running at close to 3% a year. In other words, goods costing £100 last year now cost around £103. Even worse, household expenses have risen far faster, leaping about a sixteenth (6%) during 2004/05, putting the pinch on homeowners in particular.

What should you do? The largest single expense for most homeowners is their mortgage, so look to remortgage. Also, shrink your everyday bills with A Dozen Ways To Make £500.

4. We don't have enough savings!

By mid-2005, UK residents had £541 billion of cash on deposit, which averages out at almost £22,000 per household. Sadly, most of this cash pile is owned by the rich and super-rich; in reality, most of us don't have enough savings to meet even a couple of months' living expenses. Furthermore, savers don't make their savings work hard enough, so we lose out on about £10 billion of extra interest every year. Ouch!

What should you do? Read Three Steps To Becoming A Super Saver and check out the deals in our Savings centre.

5. We've forgotten how to budget!

Budgeting is a simple skill: it boils down to "spend less than you earn". However, recent generations have failed to learn this lesson from their parents and teachers. Instead, we unwisely "keep up with the Joneses" and, as a result, for every £10 of take-home pay, we spend about £11. Of course, we can only keep spending a tenth (10%) more than we earn by borrowing more or dipping into our savings, so we're squandering our futures to live for today. Oops!

What should you do? Learn to budget and visit our Get Out of Debt centre!

6. There's precious little support for sick workers!

If you fall ill or have an accident, don't expect much financial support from the State. A salary of, say, £25,000 a year comes to roughly £400 a week after deductions, yet the standard rate of Statutory Sick Pay is just £68.20 a week. What's more, although tenants can claim Housing Benefit, the support for homeowners with mortgage is pathetic, as this article explains. Of course, your employer may provide company sick pay, but even this will run out eventually, and then what?

What should you do? If you don't have a hefty cash cushion, consider buying income protection insurance to minimise the impact of long-term sickness. (For example, I get half of my pay if I am too sick to work for more than six months, which is a comfort.)

7. We're facing poverty as pensioners!

Three years of stock-market falls, plus various pension-related crises (such as the near-collapse of Equitable Life) have made pensions as popular as bubonic plague. Nevertheless, unless we start saving more or delay retirement, we face a future of cold beans and daytime telly, instead of slap-up meals and sunshine holidays! The good news is that rules being introduced next April should breathe new life into pensions, so Get Ready For The Pensions Upheaval!

What should you do? There's no easy solution! However, here's my strategy, and our Pensions centre should help you to consider your options.

8. The house-price boom is over!

Consumer confidence and spending in recent years have been boosted by one "wealth factor" in particular: booming house prices. Although the long-term growth in house prices has been about 8½% a year, the average house price has doubled in the past five years alone. This has encouraged many homeowners to borrow against the value of their homes in order to improve their standards of living. Alas, this is a dangerous game, as I warned in Lessons From The Last Housing Crash, especially as the house-price boom definitely seems to be over!

What should you do? Stop borrowing against your home, for starters! Also, Cheaper Loans Mean Happier Homes shows you how to lighten your mortgage burden.

9. We all die eventually!

Every single living thing dies sooner or later, but humans are unique because we grow up knowing that we'll die one day. You can't prevent this inevitability, but you can take steps to reduce the financial blow of an unexpected or early death, which is vital if you have dependents, especially young children. Death usually hits families in two ways: a sudden loss of income, and inheritance tax problems.

What should you do? You should make a Will and take steps to Protect Your Wealth. In addition, check out the cheap protection in our Insurance centre.

10. We pay too much for almost everything!

When I reach into my pocket for my credit card, debit card or cash, I pause to see if I'm paying the "right" price. Whenever possible, I ignore the price that I see and decide on a price that I'd like to pay, which is often considerably less. However, most of us just hand over our hard-earned, without realising that we could negotiate a discount. I call this "ticket blindness" - we see the price on the item and ignore the opportunity to pick up a bargain.

What should you do? It's simple: learn the techniques in The Best Ways To Pay Less or let price-comparison websites do the work for you.

Finally, take comfort from these two facts. First, you're not alone, because millions of other people face the same financial worries. Second, with a little research, you can find ways to beat these problems and build yourself a stronger future. Good luck!

More: Get cheaper 0% credit cards, personal loans, mortgages, savings accounts, insurance and pensions.