Big Money Index reveals Britain’s debt time-bomb

Britons are borrowing more money than ever and failing to save money or pay off existing debts, according to AXA’s Big Money Index. The Index, a quarterly report intended to summarise the financial feelings and attitudes of the country over a variety of demographics, reveals that the population is following a frugal last quarter with unprecedented amounts of “lifestyle borrowing” in an attempt to avoid a similarly low cash-flow this quarter. The money is largely being spent on entertainment, leisure, and low-end goods such as clothing, sports or hobby equipment, and small-scale electronics.

In terms of the prevailing financial feeling, the report reveals attitudes of worryingly low optimism for the financial outlook this quarter. This is true even amongst the wealthier demographics such as the “Prosperous Later Years”: the over 50s enjoying a top ten percentile retired income and healthy savings portfolio.

As one of the groups with the most disposable income, it is of concern to financiers that they feel little optimism regarding their financial prospects. This pessimism, while perhaps unfounded, is largely shared, with debt repayments and saving falling dramatically and more than a third of the report’s respondents saying that they do not have enough money to save for retirement. If the current trend continues, the next quarter could see a far higher take-up of independent debt management schemes among the childless 20-35 demographic.

Spiralling out of control

In an effort to fund their lifestyle borrowing, more and more people are putting their credit rating in jeopardy by using credit cards. An enormous 84% have a credit card, and those who borrow on their cards are the group most likely to struggle to make ends meet or make payments, leading to increased awareness of the need for early debt advice for young people living independently for the first time. Short term borrowing of this sort, which also includes short term loans from reputable and not-so-reputable sources, is the key cause of spiralling debt, which can mount up quickly and leave families in desperate need of debt consolidation services.

The director of customer partnerships for AXA Nick Turner has warned those who indulge in lifestyle borrowing, stating that: “Caution must be urged against borrowing to make life more comfortable”. He also told the report that the largest drop in confidence came from the retired community, especially those on fixed annual income retirement schemes who are bearing the brunt of Britain’s enormous deficit.

However, it isn’t all bad news; he also commented on the one positive thing to come out of the current gloomy financial climate, which was “an encouraging rise in the number of people trying to educate themselves and stay on top of money and personal finance matters”. Indeed, the quarter has seen a much higher take-up of Individual Voluntary Arrangement schemes – the much-discussed IVA – which are an accord engineered around a person’s spending and salary to tailor an individual, manageable way out of debt.

Article written by DAG, a website that provides specialist debt advice and debt consolidation solutions

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