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The debt debacle – what can be done about it?

Ross and Karen approached Generation Wealth Management looking for advice. As parents of two young children they wanted to ensure they had adequate life insurance to provide for the family should something happen to one of them.

During our initial Fact Find – a review of the couple’s current financial situation including information on income, family expenditure and available budget for cover – a substantial debt was uncovered. This rather changed the conversation with debt advice being given and debt counselling discussed. The couple left to discuss their options.

A short while later we met with the couple again – who now had a debt payment plan in place – we discussed the outcome of the financial audit and Fact Find.  The couple’s priorities were to ensure that should something happen to one of them the other would be able to pay off the mortgage; the leeway to pay for funeral or other costs was a bonus.

The couple decided upon decreasing term life assurance, family income benefits and critical illness insurance. This life cover would allow the mortgage to be cleared, the family income benefit would provide a second wage should the unthinkable happen and the critical illness provided additional peace of mind.

Outcome

Debt has become a huge problem, especially in recent years as the credit culture has become well established. Credit is so easily accessible that often there is no need to save up for something; it can simply be bought with credit.

However what is initially purchased on 0% can quickly become 19.9% or higher. This jump can easily trap couples like Ross and Karen into a cycle of robbing Peter to pay Paul.

The Fact Find offered by Generation Wealth Management provided an unbiased black and white image of the serious reality of the couple’s debt situation. This allowed them to reanalyse their situation and showed how precarious their current situation was. By taking sensible steps they could take the first steps to regaining control of their finances.

Both Ross and Karen are devoted to their family unit. They are thankful for the peace of mind that being fully protected has provided them with.

 

Rob is a 27-year-old, single and living in London.

Rob’s initial comment to us was:

“Considering the recent global crisis, and uncertainty in the jobs market, why did I spend so much on non-essential items such as cars and expensive holidays. I should be saving more!”

Grandad was right! Save, Save, Save…

Rob was concerned that he and his peers where spending too much on non-essential items. He wanted to learn the lesson, listen to his grandad’s advice and start saving more. He was already funding his workplace pension to a reasonable degree, but was living hand to mouth, month on month, despite earning a reasonable salary.

Our adviser told Rob that his first job was to prepare an accurate budget of current expenditure. This included details of ‘unconscious’ spending, such as magazines, coffee, sweets, alcohol etc. These small insignificant costs added up to a significant total.

Once Rob was fully aware of his expenditure he was able to target certain areas he could reduce costs. These included some of the above, together with, T.V. media subscriptions, mobile phone charge, food takeaways, eating out and coffee! These reductions did not affect his standard of living, but did allow him to start saving a monthly sum, invested in tax efficient Cash and Stocks and Shares Individual Savings Plans (ISA).

The target agreed by Rob with us, was for him to have the equivalent of at least six months net income available in case of an emergency, such as redundancy, illness, and any other unusual expense. As Rob also decided to cut back on the more expensive holidays and down grade his car (that he seldom drove), he was able to reach his target within 21 months and increase his pension contribution slightly too.

Outcome

Rob is happy that he will now be able to weather most financial storms as his savings, together with new protection policies will ensure he has adequate emergency funding should the unexpected occur.

He is now on a mission to educate his peers. Well done Rob!