Gary's views

Gary's weekly views

Each week an article by Gary has appeared in the Plympton Plymstock and Ivybridge News in South West Devon. The articles are published here

C0NSUMER DEBT

The total UK debt on credit cards exceeds £50 billion. The average adult in Britain now has personal debts (over and above any mortgage) of £5,330, most of it on our flexible friends. Meaningless figures? Well try this one for size: nearly three-quarters of all credit in Europe is taken up by the British!

We have become the nation of consumer debt, living on the never-never. And these figures do not include all of the re-mortgaging of recent years to purchase those goodies we simply cannot live without. Is this a problem or simply a facet of modern life?
For me the danger is sustainability. What happens if there is another recession and unemployment rises significantly; what if house prices tumble again; or have we really now conquered the laws of boom and bust? Drawing from the lessons of history, I somehow doubt it. In any event for thousands of people consumer debt is a problem now.

Speak to the hard-pressed heroes at the Citizens Advice Bureaux and you will quickly find that debt is the number one crisis facing their clients. I am certainly not in a position to lecture anyone. A few years ago my bank manager told me that if I ever became Chancellor of the Exchequer he would emigrate – hardly a pat on the back for my stewardship skills!

We are daily bombarded by adverts and glossy brochures from banks and lending agencies, begging us to borrow more money. Don’t worry if you have been turned down by others, or have a drawer full of county court judgments, the siren voices call, we can help you. Some call on the government to legislate to hold back this tidal wave of temptation.

Perhaps, but what about changing the culture. One of the most impressive books I ever read was called “The richest man in Babylon.” It described a man who from the day he received his first ever pay packet, saved ten per cent of everything he earned. He never touched this growing pot of capital, only the interest on it. Once the years and compound interest had done their job, middle age and retirement years were buttressed by significant security of capital. He never had a credit card.

No matter how little we earn in our first job, it is surely more than we had before we started work! Everyone can afford to save 10%. How about teaching this simple but life changing principle to all of our children.

posted by Nigel on Tuesday, July 27, 2004