According to a commentary by West Lancashire Citizens Advice Bureau in early January 2015, their advice services are experiencing unprecedented demand in West Lancashire in the aftermath of the festive period. They go onto state that many forecasters say this year could be one of the worst in recent times.
The average personal debt among those seeking help from Lancashire West CAB is £12,000 with some wards in West Lancashire are among the most deprived in the whole of the North West. The CAB state that many of the clients they are seeing have got into debt through changes to the benefit system, such as the bedroom tax and council tax changes. Pay day loans have also caused a problem, but these are the minority rather than the majority.
Payday loans should become less of a problem following the cap in the interest that they can charge which came into effect from 5 January 2015. This now means that Payday Loan companies cannot charge more than 0.8% per day, default fees are capped at £15 and there is an overall cap on interest and fees so that these cannot exceed 100% of the amount loaned. These caps have seen a number of Pay Day loan operators take the decision to cease operating and we have also seen in certain instances balances owed written off.
Bev Budsworth MD of The Debt Advisor Ltd acknowledges that her business has seen an increase in the number of people seeking help in January. It is clear that people are seriously struggling to cope because of benefit changes but also due to their income having stagnated over the past few years as employers have not been able to offer annual increases in salaries.
The increase in the number of foodbanks in Lancashire in also a worrying sign of increasing numbers of people falling below the poverty line. There are at least 30 established food banks in Lancashire, with most big towns and cities having at least one. Although most food banks in Lancashire are located in the most deprived towns and cities (e.g. Morecambe, Fleetwood, Skelmersdale, Preston and various towns in East Lancashire) many have been established in areas not traditionally associated with high levels of deprivation, such as Clitheroe, Ormskirk, Chorley, and St Annes, and also in more rural areas of the county, such as Burscough and Carnforth.
According to a report by Unison, all of the food banks reported that they had seen a dramatic rise in need, particularly in the past two years. In mid 2013, Community Solutions, which runs what is perhaps the largest food bank in Lancashire (covering most of East Lancashire), was reporting an increase of 277% in referrals compared to the year before.
Insolvencies in Lancashire
It is not all bad news however. According to statistics provided by Lancashire County Council, the number of people the number of people who have entered into some form of insolvency in the 12 districts of Lancashire has declined from 2,994 in 2010 to 2,270 in 2013. The rate of insolvencies have continued to fall in 2014 and it is likely that this trend will have followed for Lancashire. Blackpool continues to have the highest numbers of personal insolvencies in Lancashire which reflects the lack of employment in the area.
However, whilst personal insolvencies are an indicator of debt issues, these statistics do not include individuals offering informal payments plans to their creditors. These are known as debt management plans and are offered by both the free sector and commercial debt management companies. On average there are 10 debt management plans in existence to 1 formal insolvency. As such it is likely that there will be many thousands of people in Lancashire on debt management plans.
In 2014 debt management became regulated by The Financial Conduct Authority. This is really good news for all customers of debt management companies as the rules and regulation are now much stricter. These companies had to have applied for interim permission by April 2014 and they then had to submit their full authorisation application by 31 December 2014. It is understood that a number of debt management companies in the North West did not submit full authorisation applications which means that come 1 January 2015, they could not continue to look after their customers. One of these companies is Spencer Hayes who went into administration. It is understood they were based in Blackburn. Clearly it is vital that anyone seeking debt help makes sure that the company is authorised and regulated by The Financial Conduct Authority. You can check online using this link.http://www.fsa.gov.uk/register/firmSearchForm.do
Looking forward to 2015 below are some helpful tips on getting your finances into shape
Following on from our Christmas Savings Guide we’re following up by looking ahead to 2015. Why not start off 2015 with a fresh approach to managing your finances? There are three basic steps to creating an efficient budget:
- Identify how you are spending money
- Evaluate those expenses to see how they mesh with your financial priorities
- Cut or track your ongoing expenses to see that you stay within those guidelines.
If you are able to follow these steps you should be on your ways to a successful budget, but make sure you keep in mind the following:
Start with your after-tax income
Be sure to calculate your budget for your earnings after you deduct your tax and national insurance contributions. Don’t rely on variable bonuses or non guaranteed income in your budget. By doing this you can assess exactly how much money you can rely on when budgeting, whilst also leaving room for extras if you can secure extra income.
Download a Budgeting App
There are a variety of free mobile and web apps that allow you to keep track of spending. Read some reviews and find the best one for your needs. Ensure that you use it to log purchases. Even smaller purchases add up and logging them helps you examine where your income goes. Here are some apps you can use to help you budget:
- Goodbudget (iPhone and Android)
- Toshi Finance (iPhone only)
- Home Budget (iPhone and Android)
Create a list of Financial Priorities
Different purchases and expenditure have different levels of priority, fixing your car so that you can go to work is a bigger priority than buying tickets for a gig. There are many financial priorities that you can plan and aim for. An example of some of these is:
- Being able to live within your means
- Decreasing your overall debt level
- Being able to create an emergency fund
- Saving towards a house
- Retirement Planning
Depending on your situation it is very important to follow these priorities, not spending on less important purchases or goals until your priority goals are met.
Track expenses for two months
Use a budgeting app (as suggested above) or your preferred method to keep track of your spending over a two month period. Download your latest bank statements and review your spending. Create categories on the app or on paper and assign each purchase you’ve made to a category, for instance travel, entertainment, food and bills. Then add up the amount you’ve spent in each category, this will let you see how much of your income you spend on each category.
Once you’ve categorised your spending it’s time to be critical. At this stage it should be clear how you are spending your money and where you could potentially make savings. Set a goal to try and reduce your spending to below 90% of your income. This will allow you to begin saving towards important financial objectives or begin an emergency fund.
Revise if needed
Once you’ve finished the two months of tracking your spending, you should continue. This will allow you to monitor your expenditure and ensure your spending stays within the limits set out in the evaluation.
It is important on both sides of the scale to be realistic in what you can and can’t afford in your budget. Whilst a nice holiday abroad sounds ideal, but it could seriously jeopardise your plan. It is so important to properly cost out any large spends and prioritise the most important. It also important to factor in how much of your income you can afford to save. Whilst trying to only spend 90% of your income will allow you to make savings, if you have debt that is accruing interest it is far more important to start paying the debt down before establishing savings. Focus debts with higher rates of interest as a priority, once these are paid you can begin saving an emergency fund.
Start an Emergency Fund
If you’ve paid down or don’t have any debts, you can’t start looking to create an emergency fund. An emergency fund will provide great comfort if a disaster occurs. You should add to your emergency fund whenever you have spare income. The amount needed in an emergency fund will vary from person to person but a typical fund will be enough to cover between 3-6 months of your income. There is a massive feel good factor to seeing your savings grow. You should then find that your financial life becomes much steadier which will undoubtedly lead to a less stressful life.
If you are struggling with debt issues, whether these are business or personal debts, The Debt Advisor Ltd which incorporates The Business Debt Advisorcan help. There are a range of solutions available which include both formal and informal solutions such as Debt Management Plans (DMP), Individual Voluntary Arrangements (IVA), Bankruptcy as well as solutions for Businesses.
There is also free debt help and advice available through a variety of debt charities. For more information, we recommend you visit www.moneyadviceservice.org.uk.
The Debt Advisor is regulated by The Financial Conduct Authority and is also a member of the DRF and we adhere to their codes and standards.
Call us today on 0800 0851 825 to speak with one of our advisors. If you’re calling from a mobile you can reach us on 0333 9999 600.