Wednesday, November 04, 2009

Climbing out of recession

Previous posts - No Money, No Excuses Pennywise

Like Earl Hickey, I have made a list. Topping the list is my usual November pay-day wage, a four-figure sum. From there is subtracted the final installment of the Inland Revenue's required payment, various bank charges, rent, and utility bills. As currently calculated my budget for the remainder of this month is around £50.

As described in the earlier posts on this subject, I am acutely aware of how this financial situation, tough as it may be, is a temporary measure. That it involves such an extreme drop from one figure to the other is unusual but not unique.

It is one resulting from earlier errors now rectified and learned from.

There are people possibly no further from my house than two streets away whose financial state is far deeper and harder than mine. However if something has really come to the centre of my mind these past few weeks it has been just how easy it can be for a person to remain at the foot of a steep financial mountain despite their best efforts. I am more aware than I was last month, on a three-week budget of seven pounds, of how best to make the money last; and I cannot ignore the words from my boss who reminded me how her generation often had to make very little go a very long way.

What has angered me more than usual during this period is the continued availability of 'easy money', even with the recession so deep and long-lasting, and the nation's banks under such scrutiny. Plans to tighten up credit card terms are to be broadly welcomed although any forced increase in minimum payments must, surely, take into consideration the 'death spiral' into which people fall when forced to pay more than they can afford. Again, I have to make clear that the depth into which people fall is largely their own fault - "guns don't kill people, people do" - however it does not take long to see how the banks and credit card companies encouraged quick loans and easy credit when times were good with little regard to the long term consequences.

One particular consequence from banks having to almost stop the availability of loans and easy credit is the continuation of loan companies advertising and door-knocking to entice the already vulnerable into contracts they cannot possibly afford. This really gets to me now that I can appreciate just how easy it can be to fall from a complacent attitude to spending into a very tight and tough financial hardship.

One company I caught advertising during a daytime cookery show yesterday - I won't name them - used a plain looking model pretending to be a housewife talking in glowing terms about getting same day "top ups" to her wages, in easy to afford amounts for paying back at her convenience. The terms and conditions printed in very small text along the bottom of the screen confirmed nothing more strenuous than a valid e-mail address would suffice for identity. Its APR - the rate of repayment, a good indication of the relationship between the end amount you pay with the amount originally loaned - was quoted as 2,356%. Two thousand, three hundred, and fifty-six percent.

I am confident that my attitude to money and spending will be all the better from my experiences last month and this. I remain, however, concerned and indeed marked by this period as a time when I could see far clearer than before how much must be done by government, banks, and financial institutions, to stop the culture of cheap money and spending without consequence. The financial meltdown will not end at the behest of bored journalists looking for a new scandal to type up: people who remain at the bottom of the pile because of our deep, dark recession may be suffering for decades to come, leaving that as the real legacy of our elected representatives' drive to "end the era of boom and bust".