Thursday, November 3, 2011

Britain's Secret Spenders - are you one of them?

Are you one of the many millions saddled with spending debts from loans, prepaid credit cards, overdrafts or other forms of borrowing?

Are you also one of the 1 in 5 Brits who fail to share financial help date with your partner - or the one in ten who has a secret credit card?

If so, it's time to own up - to yourself at least - and take stock of your situation. Personal debt levels have soared in recent years, at a time of recession, spiralling inflation, rising unemployment and poor growth prospects.

Many of us are trapped in the reality of negative equity, expensive credit card debts, outstanding loans from the days where business was booming, an ever rising cost of living and little hope of an income raise!

If your debts have escalated to problem levels, or you are secretly spending, it could be time to seek help.

There are a wide range of personal and independent debt advisers and agencies who can offer confidential, valuable advice on how you can work yourself out of debt.

This includes basics such as setting a good household budget with allocations for 'nice extras' and socials, switching from expensive credit cards to low or zero percent cards to clear an existing balance, or trying prepaid credit cards to limit spending whilst shopping.


Other tactics can also combine to make great gains - using vouchers and discount codes, carrying out price comparisons before buying, tackling the underlying motivators for spending, switching to a cheaper mortgage, cutting out unnecessary spending and other such tricks.


The type of debt should also be considered - not all debt is bad. Examples of good debt include a mortgage, business loan or student loan, but the ratio of debt to income should never be more than 35%, according to standard wisdom.

Bad debt includes credit card spending that is never paid off and escalates, store cards that aren't paid off in full each month and general purchases on credit for disposable items.

Car loans can be considered a bad debt if an expensive car is bought that is unnecessary to the driver - the high APR and the effect of rapid and immediate depreciation on a car as soon as it's used, means that no value can be generated from taking on the debt (other than the practical advantage of owning transport).

It's important too to be honest about your spending. Hiding debts and credit card bills from your partner isn't a healthy foundation for any relationship.

Finances between couples should be discussed in the same way as any other important aspect of life. For married couples in particular, joint financial affairs require total and honest disclosure.

Remember too that an inability to handle debt correctly will lead to a damaged credit rating. This will have an ongoing effect on your ability to take out credit in future, which may become a problem if you and your partner are looking to remortgage, for example.

So this is a wake-up call to everyone really whose head is still in the sand about secret spending habits. Be brave, tackle them face on and take control of your spending - rather than letting it take control of you.

Article written by Sam, sometime secret spender and writer at MoneySupermarket.com, the UKs number one comparison website for credit cards, including premium and prepaid credit cards.

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