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Financial Planning and Management for Households
Date: June 2010
Few families will have experienced anything quite like the past two years. Not one
will have escaped the ravages of either the financial markets meltdown or the recession
-
First the financial markets collapsed under the weight of sub prime debt and the speculative financial instruments that were sold around the globe. Lack of confidence meant that many household names collapsed or were taken over in rescue plans by larger, more secure partners. The effect on households was devastating. Credit dried up, mortgages were almost impossible to obtain and house prices fell. Stock markets tumbled as Armageddon loomed meaning that those nearing retirement saw the value of the pension pots plummet and the likelihood of a meaningful annuity all but disappear.
No sooner was the full impact of the financial markets collapse upon us when the
recession hit. Whilst global in reach, its impact was very local. Tiger economies
in China, India, Russia and those closer to home in Spain, Ireland and Greece failed
as demand dropped. Interest rates fell to record lows in an attempt to kick start
growth -
Household budgets have been ravaged. Those not in the public sector have seen wages
fall, jobs lost and overtime disappear. As unemployment has risen, so have house
repossessions -
So many households are now getting used to having less cash and having to budget carefully rather than relying on easy credit or ever increasing incomes. Prioritising is key when things get tight. Mortgage or rent plus council tax, electricity, gas and water bills have to be paid. Make sure you keep a roof over your head and the foundation to your family sound. Testing financial times put enormous strains on personal relationships too so learn to give and take and to talk about financial issues rather than bottling things up.
Cut out the luxuries until you can afford them. Stop smoking (never been a better
incentive to stop) and give up the gym membership. Shop in cheaper supermarkets and
make meals rather than eat out. Plan days out -
But some have serious debt issues. Whilst there are a number of good effective debt
management plans for those with small debts, larger ones may have to be tackled more
radically under an Individual Voluntary Arrangement (IVA). IVA`s allow you to pay
off your debts under the supervision of a plan manager and a court approved plan
with your lenders. Usually lasting five years, once you have made the payments as
agreed at the outset any remaining debt will be written off. This scheme allows you
to get back in control of your finances with the help of a licenced insolvency practitioner.
Although your credit rating will take a hit -
You can read more about Individual Voluntary Arrangements here.