Fears over economy 'lead to financial change of heart'

22/06/2009

The tough economic conditions have scared people into being "very sensible" with their money at the moment, a financial site has claimed.

According to an expert at The Motley Fool, people have changed habits - borrowing less and concentrating instead on paying back their debts.

Fears of unemployment, which has jumped to a 12-year high in the economic downturn, were seen as a major factor in this turnaround.

Meanwhile, recent figures from accountants Ernst & Young has exposed the squeeze that has been put on budgets over the past few months.

The report found that the typical per-household disposable income has dropped by £200 since last year.

David Kuo, director at the Motley Fool, said: "People have been scared into being responsible because every day we hear about the possibility of more people losing their jobs and the prediction is that around one in ten people who can work will be out of work by the end of this year.

"What they are trying to do now is to either repay the debt that they have, so that the burden is not as great when they are unemployed."

EuroDebt director Kevin Still commented: "Loss of income has become the number one reason for people now joining a EuroDebt Debt Management Plan, overtaking 'debt spiral' for the first time.

"This reflects the fact that many households have seen a major decrease in their disposable income which has meant they can't meet the minimum contractual payments on their unsecured credit commitments, like store cards, credit cards and personal loans. What is important is that sensible budgeting has come to the fore and people in difficulty are taking a responsible position with regard to coping with reduced income or the possibility of loss of income."

Tags; Current UK Economy, Recent Graduate Debt, Young Family Finances,

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