A turbulent job market, financial challenges and covid are all testing people’s ability to handle their money. This has led to a sharp increase in consumer credit card debt. Many more people are relying on their credit to get them through the month and saving less.

Beyond expectations

We’ve seen fresh data released from The Bank of England showing that consumers have borrowed more than £1.2bn on credit cards in November of 2021, representing the highest amount of borrowing of this kind in well over a year. While analysts were expecting some increase in credit card debt, there are worries that the sudden spike could be caused by inflation squeezing peoples budgets. These numbers are above what was forecasted by a significant amount, with predictions previously being in the region of £0.8bn.

Confidence or overconfidence?

It’s important to note that these figures aren’t always indicative of an entirely negative issue. In many cases, borrowing patterns are analysed by economists to estimate the ‘confidence’ in an economy and the people that support it. In this case, the increase in borrowing has been viewed by some as something of a return to the level of economic confidence present before the pandemic shook up incomes and threatened livelihoods.

Be that as it may, it can still pose a real threat to people who may be struggling with long-term financial stability. While taking a loan to cover important life expenses maycan be appropriate, doing so without appropriate planning can leave an adult or family effectively reliant on that additional income to cover living standards and expenses. The flipside in the present climate is that many families and households are turning to loans to cope with the significant increases in food bills, rent, and energy utilities.

Drawing on savings

A further indicator of the current economic climate can be seen in the amount of money stored in deposit accounts. The Guardian found that in November of 2021, there was about £4.5 billion being held in these accounts. By contrast, the average over the previous 12 months was £11.2 billion.

This is a massive change from the average and reflects a changing attitude among consumers. Part of this change reflects a more confident attitude according to The Guardian. People feel more confident spending their money rather than keeping it in reserve. However, there is a worry that some people are simply saving less because they have seen an increase in bills.

Generation Z: A demographic in need

There are significant differences in spending and saving habits between different age groups, with generation Z – 16–24-year-olds – showing signs of financial stress as a demographic.

Recent figures released by the Financial Ombudsman Service are showing a drastic increase in the number of young adults in generation Z seeking help with debts, credit card payments, and various forms of loans. With this increase being over 200% of what it was compared to 2016 and 2017, this enormous increase in requests for support indicates a younger generation struggling to manage rising living costs and difficulties with salary.

In addition, this demographic has demonstrated a similar increase in enquiries regarding loans, which are categorised by the Financial Ombudsman Service as including car-related loans, personal loans, and those for the purchase of property.

With younger demographics tending to have lower average incomes than older generations, this increase in requests for support is easy to understand. The kind of financial pressure experienced during difficult economic periods like this one varies depending on a person’s circumstances. Since young people have fewer resources to call upon, they are more vulnerable to financial stresses.

Choosing a path forward

If you are re-evaluating your finances with an eye towards enduring the uncertainty of today, well done! Taking any kind of proactive step to secure and understand your money is a great thing to do, and the experience it provides will help you in the future. Here are a few pieces of advice that might help.

Review your past as you plan your future: A basic bank statement is a powerful tool. As you adjust your expenses and monthly outgoings, take the time to work through your online bank statement. Categorising your expenses into basic sections will help to visualise this data more easily, and will make it more obvious to you where your money is going.

Talk sooner, not later: If you have any obligations you need to re-evaluate or negotiate, it’s best to get in touch with the other party quickly. This usually works in your favour, with a newly negotiated arrangement removing stress and helping you to plan your new position and actions in the coming months.

Consider consolidating: The more financial complex your finances the more time they take to manage. Consolidating your various payments wherever possible means you will have less to worry about and it will usually make your life simpler. If you plan to do this, be sure to thoroughly plan your income, outgoings, and any additional fees that may be attached to your various existing obligations.

Here’s to a better year ahead!

We are living in unique times, there’s no question about it. The Evlo team hopes you’ve found today’s article informative and useful and hopes you’ll stop by again for more advice on financial literacy to learn how you can do more with your money.

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It revealed levels of social debt to be in the region of £1,260 with more than 50% of people saying they spend more than planned on social occasions.

The service – set up by the government – revealed that fears of appearing stingy or tight were fuelling the high social spending.

Two in every three people admitted they spend more on a round of drinks than they get back while a third said they put in more than is necessary when a restaurant bill is split.

Meanwhile, a lack of self-control was also blamed as a reason for overspending, with 36% of those questioning revealing they have got “carried away” with their spending.

One in six people also go off on holidays they cannot afford, according to the study as they are simply unable to say no.

MAS money expert Jane Symonds revealed that saying ‘no’ is an important part of managing money, especially when it is in short supply.

However, an additional report from Nick Chater, professor of behavioural science at Warwick Business School, has said the urge to spend is engrained in to many people.

“It’s the dark side of consumerism,” he said. “Everybody values their car or house relative to other cars or houses. That means as everybody gets wealthier they get a nicer house or car.”

Despite the early signs of an economic recovery being present, the need for money management remains, but there are options available.

Those looking to purchase essential goods or afford something beyond their budget could use a personal loan to get the item, provided funds are available to pay it off within the agreed timeframe.

Such an option provides the opportunity to still purchase the goods that are wanted while also ensuring a careful eye is maintained on personal finances.

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