PAYDAY LOANS AND THE DEBT SPIRAL

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“It’s not just the weak that can end up in a debt spiral”, wrote Simon Read of The Independent (London) a couple of weeks ago. I was reassured to read that, because I had ended up in that very spiral in the late 90s and I didn’t want to think that I had been weak. Oh no, not me.

The article was topical. Payday loans had hit the headlines again when R3, the professional association that represents insolvency practitioners, warned that up to 3.5 million people in Britain are expected to take out a short-term loan to tide them over in the coming six months.

First, the good news …

Simon Read says of the loans: “if you need emergency cash and know you can pay it back within a few days, then paying £20-£30 for the privilege doesn’t seem too bad, especially bearing in mind how much the charges and interest can add up to if you go into the red at a bank.”

Then the bad news …

But as Read says, and I have written in these pages before, the obvious problem is that if you don’t repay the loan quickly then it mounts up: it spirals, in fact. What’s more, you could end up paying bank charges and interest anyway, as well as the interest to the loan company.

Wonga boss explains

The most interesting part of the piece was this. Because of the negative publicity, Wonga’s boss Errol Damelin got in touch with the Indy to offer a defence of his business methods. He said: “If things go wrong we charge a one-off default fee of £20 and then stop any further interest at a maximum of 60 days.”

That sounds fair and it’s the kind of responsible business practice that Simon Read, and in fact all of us, would like to see, though I’d like to know how Wonga defines “when things go wrong”, i.e. when does this kind of “interest cap” kick in?

The Independent would like to hear from anyone who’s had experiences (good or bad, I trust) with Wonga or other payday lenders who claim to operate fairly.

Author’s payday loan spiral

The article concluded by recommending a book by Steve Perry, entitled When Payday Loans Go Wrong. It describes the author’s “descent into debt hell”, which started innocently enough with a £250 loan for a weekend away but ended 18 months later with 64 loans from 12 different companies totalling £15,000.

My own debt experience was not caused by payday loans … but the result was similar. My business started to go wrong, so I started funding it with personal credit cards. I ended up owing a total of £65,000 to 23 separate  creditors and narrowly avoided bankruptcy. Different cause but the same spiral, which I described in my book “Back to the Black.”

WANT TO KNOW MORE?

For the full Simon Read article click here: http://www.independent.co.uk/money/spend-save/simon-read-its-not-just-the-weak-that-can-end-up-in-a-debt-spiral-6275149.html

For information about Steve Perry’s book “When Payday Loans Go Wrong”, click here: www.saynotopaydayloans.co.uk

For information about my book “Back to the Black”, click here: https://michaelmacmahon.com/books/back-to-the-black-how-to-become-debt-free-and-stay-that-way/

MORTGAGE PAYMENT PROBLEMS? AN INDEPENDENT GUIDE

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I heard recently about what seems an excellent source of independent advice for anyone with mortgage payment problems. My informant in this case was that much-hyped, but also much-maligned, social networking and microblogging service: Twitter.

Twitter the time-waster?

Many people (including many of my friends) are scornful of Twitter, calling it nothing more than a self-indulgent waste of time and / or a gossip-mill. I used to be one of them.

However, now that I use Twitter more-or-less regularly, I find it worth the effort of keeping up with the sure, there is some rubbish on there. But if I see that one of the people I “follow” tells me nothing more interesting than where they went for coffee or what movie they planned to see tonight, then I hit that useful button called “unfollow”. For those of you who find themselves swamped with “too much information” but who have never found the “unfollow” button, that’ll be because it is not obvious. If you are following sometone who flooding your timeline with dross, find their profile and you’ll see a large green icon with a tick, and the word “following”. Simply hover your cursor over  that icon and the green changes to red amnd the word “unfollow” appears. Simply click and hey presto, that person is now an ex-followee.

Twitter the information goldmine?

On the positive side, and I do like to be positive, the amount of useful stuff I have first heard about on Twitter has been massive.

Many (but by no means all) of the people I follow are financial journalists or related experts. Some of them are household names and they appear regularly on TV talking about the national economic situation, such as Paul Mason; some write for the newspapers; some are independent advisers.

YouGov guide for hard-pressed mortgage-holders

One of these very journalists recently recommended on his Twitter feed a very useful guide for hard-pressed mortgage-holders. It is published by those helpful people at YouGov (i.e. the government). So I think you’d have to agree it is free of commercial bias.

I have to admit that I can’t remember who recommended this guide, otherwise I’d give him or her a credit. And as it was a week or so back, trawling through my Twitter feed to find this particular recommendation would take too long. Moreover it would keep me from an important task; switching on the TV at 2 pm to watch Shane Williams’ last international rugby match:Walesv.Australiaat the Millennium Stadium. Bound to be an emotional occasion; however the famously competitive Australians are unlikely to cooperate by making it easy for him to cap his career with (yet another) try.

PS: the result went against Wales, in the event. As a keen supporter of that country’s rugby, I have to admit that the scoreline flattered them slightly, because the aforementioned and surely legendary Shane Williams skipped out of a tackle and ran in for a try in the final minute (in fact the 81st) of his final match for Wales. You couldn’t have scripted it better and from the crowd’s reaction you’d have thought that Wales had won the World Cup at that moment.

Citizens Advice Guide

Finally: I would suggest that this YouGov guide should be read in conjunction with the excellent information and personal advice available from Citizens Advice (the CAB).

WANT TO KNOW MORE?

For “Mortgages and repossessions: a YouGov guide”, go to:

http://www.direct.gov.uk/en/HomeAndCommunity/BuyingAndSellingYourHome/Mortgagesandrepossessions/index.htm

Topics covered:

Struggling with your mortgage payments? Put together a simple action plan to help you keep your home

What you can do to avoid repossession – a guide

What you can do if you are facing repossession to make sure you keep your home

Mortgage advice – who to see and what to take

Where to get advice about managing housing costs and how your lender may be able to help you manage your mortgage payments

What to do if your mortgage lender takes you to court

What to do if your lender takes action to repossess your home, and how repossession can be postponed

Housing advice – how to get free legal help in court

Make sure you attend your court hearing and find out how to get free legal help on the day

Mortgage Rescue scheme

This scheme may help if you are having difficulties making mortgage repayments and are in danger of becoming homeless

 

For Citizens Advice (CAB) AdviceGuide:  

http://www.adviceguide.org.uk/index/your_money/money_management_index_ew/mortgage_problems_index_ew.htm

CREDIT CARD DEBT: FACING THE WORST OR BLISSFUL IGNORANCE?

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In my last post on the subject of debt, I quoted an article by Simon Read in The Independent, where he urged people to “ditch the plastic” before they were “forced into distressed borrowing”. I think his story was repeated over several editions of the paper, with the most memorable headline being “Maxed-out Britain.”

Case study

What I didn’t say was that there was a case study attached to the article. It was the story of Catherine Hughes, who had major surgery that left her too ill to work, so that she and her husband – with four children – lost 50% of their household income.

[The case study isn’t available online, so you’ll have to take my word for it.]

Catherine was a freelance writer, her husband a heating engineer; because the family income fluctuated a lot, they had been using credit cards to finance the peaks and troughs.

Card providers unhelpful

They had debts with three credit card companies; that’s a relatively prudent and small number, compared with some people, e.g. yours truly when I went through my debt crisis ten years ago.

Two of those companies had cut off credit and all three have been very unhelpful, says Catherine.

Facing the worst?

Catherine went on: “They hold all the power. We try to stay positive and are doing the best we can but if I were to sit down and add the debts up, that would probably reduce me to tears.

“If the card companies would look at our situation on a more personal level [that would help]. We’d welcome a reduction in the interest rates.”

“Banks and card lenders should be more willing to work with people instead of … coming down on them like a ton of bricks [when they can’t meet the payments]. There should be a middle ground; but our experience shows that there is not.”

Interest rates: all-time low for whom?

Catherine mentioned interest rates. This morning on the radio I heard Mark Hoban, who is Financial Secretary to the Treasury here in the good old UK. When challenged about how he could counteract the slump in consumer confidence, he pointed to the fact that his Government had been successful in keeping interest rates at an all-time low.

If you talk of the base rate, that is true: 0.5% for a long time now. (Although some would say that because the rate is now set by the independent Bank of England Monetary Policy Committee, the Government can’t take credit for it)

Rate inflation

Now I don’t know what rate Catherine and her husband were paying on their cards but I know for sure it wasn’t 0.5%.

It was probably 15% or more; much more than 15% if any of them were store-cards. Go figure, as you guys say, I think, on the other side of “the pond”. Admittedly, if they were owner-occupiers their mortgage would have been much cheaper than before. The paper didn’t say whether they were home-owners or tenants. If the latter, the knowledge that our base rate is only 0.5% would be a sick joke for that particular family.

Can you face the facts? Should you?

Catherine had said that she’d be reduced to tears if she sat down and added up the debts. Well, I don’t want to bring more tears into her life but I do advise in my book “Back to the Black” that it is generally helpful – and I stress generally; no two cases are identical – to do exactly that. I found this out myself, when I owed money to 26 different creditors at the height of my money problems. I had a rough idea of the total but it was only a rough idea and there was a very heavy Sword of Damocles hanging over me. When I eventually bit the bullet (sorry about the mixed metaphors, lethal-weapon-wise) and sat down to make a detailed list of amounts, credit limits (many of which I had already exceeded) and interest rates, it was therapeutic. I felt much less stressed when I knew the worst.

It worked for me; I don’t say it works for everyone but if you think you can handle it, it’s a step I recommend. After all, you can’t start to make plans about how to solve the problem until you know the scale of it.

Debt-free Christmas?

In my last post I mentioned the US blogger Brad Chaffee and his “Debt-Free Christmas” discussion. It seems an impossible dream … but I plan to write more about this very soon.

 

WANT TO KNOW MORE?

For Simon Read’s article in the Independent, 6 Nov 2011:

http://www.independent.co.uk/money/spend-save/simon-read-ditch-the-plastic-before-youre-forced-into-distressed-borrowing-6257400.html?origin=internalSearch

For info on my e-book “Back to the Black: how to become debt-free and stay that way”:  

Kindle version: http://www.amazon.com/dp/B004PLMAQM.

Other versions: http://www.smashwords.com/books/view/22886

BRING BACK BRITISH RAIL?

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On Monday I was interviewed on Clifton Down Station in Bristol for a YouTube video. It was commissioned by FoSBR (Friends of Suburban Bristol Railways) in connection with a campaign called “Bring Back British Rail”. It is so-called because many people now believe that the only way to get decent and affordable rail services in this country is to put the railways back in public ownership.

The Economist magazine was, I believe, the first to reveal that although our rail-fares are the highest in Europe, the level of public subsidy is nonetheless  five times higher (inflation adjusted) than it was before the railways were privatised. It is now £5bn per annum. That is outrageous, surely. (unless you own shares in one of the Train Operating Companies to which we grant regional monopolies)

Anyway, my small contribution to this video was to relate a frequently problematic suburban rail journey I used to make here in Bristol, when I would try and travel the short distance from Clifton to my job in Ashton Vale on the other side of the city. Three miles maybe? It sometimes took an hour and a half because of inconvenient or non-existent connections; or late or cancelled trains. It never took less than 45 minutes; in fact I could walk it faster. By car it took only 15 minutes. I rest my case.

When the video is finished I’ll post it here.

That same evening, I attended a fascinating transport debate at the Colston Hall, hosted by Bristol Civic Society. I was intending to make a separate post about that but judging by the amount of expertise and strong views on display I am sure there will already be plenty of coverage in the blogosphere.

Much of the discussion was on bus services and the most depressing fact was the admission that the local authority has very little power on a range of issues, as 90% of the bus services are provided on a commercial basis by the virtually monopoly provider First Bus, who pay lip service to consultation and then do exactly as they please. A wag of a local journalist once described them as “Worst Bus”; but I didn’t say that.  (“You might very well think that. I couldn’t possibly comment”, as has famously been said on many occasions)

Interestingly I have often travelled on buses owned by First Bus in London but there the situation is totally different, in that they don’t have a monopoly. As far as I can understand it, Transport for London tells the bus companies what to do. How different from the situation in our fair city; but according to statements from the Colston Hall platform that’s a situation we are stuck with due to the differences between regulation in the two cities.

 

WANT TO KNOW MORE?

The Bring Back British Rail organisation was formed to campaign for publicly-owned railways. Their promotional material says they intend to “learn from the mistakes of BR of the past, remind the UK of the broader services that were available and the virtues of public ownership, and form a new, integrated rail system with a progressive, participatory structure”. www.bringbackbritishrail.org

Friends of Suburban Bristol Railways (FoSBR) campaigns for improved, integrated and sustainable local rail services in the Bristol area and for the reopening of closed-down passenger lines such as Bristol / Portishead. www.fosbr.org.uk

RETURN OF THE BRISTOL CULTURE-VULTURE

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I have been reminded that your previously devoted and (mostly) assiduous Cultural Attaché has been silent for a while. This digest of one-liners is an attempt to reverse that shameful trend.

*****

Health & Safety warning: I make no claims of objectivity. The items listed here are simply those I fancy.

All events are in Bristol (that’s the UK one) unless otherwise stated.

*****

NOVEMBER

9th                    ConnectOne exhibition preview at the Create Centre, 5-8 pm. Includes work by Angie Kenber, who’ll be there from 6 pm.

until 10th           “The Ides of March” (film) at the Watershed, Harbourside. I don’t normally plug movies but this one is on my personal wish-list! 0117-927-5100

10th                   Hot Club of Cowtown at St George’s Bristol, 8 pm.

0845 40 24 001

11th                   Kirris Revere Blues Band: music for dancing at the South Bank Club, Dean Lane, Southville. No other info available at this time.

12th                   Carmina at Colston Hall 2, 8 pm. 0117-922-3686

14th                   Lilian Boutté at the Coronation Tap, Clifton, 9 pm

 14th-16th            “A Clockwork Orange” at the Tobacco Factory, Southville, 8 pm. I’ve never seen a stage adaptation of that ground-breaking novel; probably worth a look! 0117-902-0344

17th                   Denny Ilett & Ruth Hammond at Rainbow Café, Clifton. Dinner show, so booking essential: 0117-973-8937. Further details on Facebook.

20th                   The Randy Swindlers at the Coronation Tap, 4 pm

24th                   Jeremy Paxman at the Watershed, Harbourside, 1 pm: “Empire: what ruling the world did to the British”. A Festival of Ideas event.

www.ideasfestival.co.uk

26th                   “Hannah’s Concert”, charity event at Tockington Manor School.  Buffet; music by Chimera featuring Ruth Hammond and special guest Pete Josef. jenny.king@edgecumbe.co.uk

27th                   Instant Wit improv comedy at The Brewery Theatre, North Road, Southville, 7.30 pm. 0117-902-0344

30th                   Steeleye Span at St George’s Bristol, 8 pm. 0845 40 24 001.

DECEMBER

3rd                    Chumbawamba at the Folk House, Park Street. 07855 826 228.

 

DEBT-FREE CHRISTMAS? YOU MUST BE JOKING …

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A couple of recent stories by Simon Read in the UK’s “Independent” newspaper  (see below) reveal that UK consumers are once again extending their credit card debt, after a period when the trend seemed to be reversing.

What’s more, they are using cards not for luxuries (i.e. “discretionary spending”) but on essentials.

Christmas is coming: the debts are getting fat

The situation for many of those “hard-working families”, as our politicians like to call them (surely that’s discrimination against single people and lazy people?) will probably get worse in a month or two. Why? Not just because of the underlying economic situation and rising inflation, but because of the “retail eternity” (to quote my hero Loudon Wainwright III) that we call Christmas.

Peer pressure

 We have been conditioned to believe that one can’t celebrate Christmas properly without spending a load of money. So those in debt are going to get deeper in debt. If you have young children, peer pressure and the blandishments of advertisers will try hard to ensure it.

US blogger promotes debt-free Christmas

That’s why I gave three hearty cheers when I found that an American blogger called Brad Chaffee had started a discussion thread called “Debt-Free Christmas”. I communicated with Brad and told him how much I liked the idea; he got back to me promptly, saying that the concept was very much alive and well in his family, even if the blog thread is less active right now.

Practical solutions?

What I take as the meaning of his “Debt-Free Christmas” was not so much to get right out of debt at this time of year – that would be a very tough aspiration – but how to find practical ways of having a great Christmas without getting further into debt; despite inflation and peer pressures.

Gift spend limit

In future posts I’ll be talking about how we’ve done it in my family. The most successful method was putting a limit on the gift spend per person. That forced a rethink, compared with the previous procedure of: “Oh God, only a week to go and I haven’t finished my gift shopping; must throw some more money at the problem”.

The new rule didn’t just save money, it unleashed lots of creativity.And we had just as much fun, maybe more.

Over to you

I’d like to throw this open. All contributions welcome!

 

WANT TO KNOW MORE?

 

For Simon Read’s article in the Independent, 6 Nov 2011:

 

http://www.independent.co.uk/money/spend-save/simon-read-ditch-the-plastic-before-youre-forced-into-distressed-borrowing-6257400.html?origin=internalSearch

 

For info on my e-book “Back to the Black: how to become debt-free and stay that way”:  

 

Kindle version: http://www.amazon.com/dp/B004PLMAQM.

Other versions: http://www.smashwords.com/books/view/22886

BACK IN HARNESS

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Both of my regular readers will have noticed that I’ve been totally silent for two weeks. That’s because I’ve been on holiday; a wonderful holiday in Italy, if you’re interested. (first Apulia, then Rome)

I could have blogged from my Blackberry but (a) I decided not to pay my service provider’s charges for overseas roaming or whatever they call it; and (b) I also decided that the world could do without my dubious pearls of wisdom for two weeks.

But I’m back in beautiful downtown autumnal Bristol today; truly a season of mists and mellow fruitfulness. So stand by your beds, metaphorically speaking, because there will be some important stuff coming soon on this blog. Important to me, anyway.

RETIREMENT SUCCESS FACTORS

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When I started planning my own retirement (though that’s a word I try to avoid; I’ll say more about that in another post) I started reading books on the subject of retirement planning. That made sense, I thought. Then I started to realise how many aspects there were to the subject.

One book that caught my eye was called “The Beginner’s Guide to Retirement” and subtitled “Taking Control of Your Future”; I thought that would do very nicely to start with. It’s by Michael Longhurst, an Australian psychologist who was responsible for designing and delivering a research project called “Retirement 200”; so-called because they interviewed 200 retirees at length; 100 men and 100 women.

Glancing inside the book, I saw this quote on the frontispiece:

“You are beginning a glorious opportunity to learn, to give new things a go, be prepared to use your talents, use all of your abilities to widen your lifestyle, try everything until you are satisfied”.

Yes, I thought, I want some of that.

Retirement Success Factors: a definitive list?

As a result of all those conversations with the 200 retirees, Longhurst came up with a list of factors that he calls “Retirement Success Factors”. As a way of starting this project that I’ve called “When I’m Sixty-four”, I want to flag up the Retirement 200 list, in order to get some feedback. In due course I’ll expand on what the book says about the significance of these items; and I’ll report on where I agree (and in some cases disagree) with this list.

For now, here is the list of “Retirement Success Factors”:

  • the ability to choose the point of departure
  • being 55 or younger at the point of retirement
  • having meaningful activities
  • being financially independent
  • being in good health: physically, mentally, psychologically
  • having planned one’s retirement
  • having emotional support
  • having access to education or coaching

What do you think? Whether you are planning your retirement (doesn’t matter if you are 40 or 64), or you’ve already retired and are happy and fulfilled, or already retired and bored, your comments would be welcomed!

 

RUGBY WORLD CUP: A TRANSFER MARKET SHOP-WINDOW?

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I’ve been watching lots of the Rugby World Cup over the past couple of weeks and i suspect I shall be watching more as the competition gets “down to the wire”, i.e. the knockout phase. I’ve seen some great matches. My only problem is that I booked a holiday to Italy in mid-October and we’ll be there while the semi-finals and final are being played. Even that’s not a problem though; we’ll be visiting my Welsh cousin and her Italian husband of 25 years and I know they are both keen rugby fans; televisual access will be available, I am sure.

This morning I told myself that I would do some work and not watch Japan vs Tonga, as those two are very much the also-rans in a group containing New Zealand and France. However, my resolution was weak and I switched on for ten minutes just before half-time. What did I discover?

JAPANESE IMPORTS, NOT EXPORTS

I saw a try for Japan, by one Michael Leitch. Also in the team were Sean Webb and James Arledge, though I might have got the latter’s name slightly wrong. Anyway, all three were clearly imports, under the rule that allows rugby players to qualify for their adoptive country by virtue of a couple of years’ residence.

GRANNYGATE

Yes, I hear you say, but this is hardly new. Years ago, Wales fielded several players who had been born and brought up elsewhere but had a a Welsh grandparent, giving rise to the term “grannygate”. Shane Howarth was, I think, the first player to get a cap for Wales under this rule.

EARLIER IMPORTS

However, the game moved swiftly on. Players with no family connections were registered under the residency rule. I recall France fielding a centre called Tony Marsh. Not a French name, that, you might say, and you’d be right. He was Australian and I think he was one of the first to benefit from the residency rule.

Nowadays, it’s gone crazy. New Zealand has for years been poaching players from the Pacific Islands and I am pretty sure I heard today’s commentator refer to one of the Tongan players having been brought up in Australia. So the deal is this; if you are one of the top players in a second-tier country, then you might welcome being poached by a top nation. If, on the other hand, you were born and brought up in a top country, say NZ, but are not quite good enough to make the All-Black team, then you could consider moving to another country so you can play international rugby. Thus we have two current England centres, Shontayne Hape and Manu Tuilagi, who are imports; a third centre, Ricki Flutey, also an import, was an England regular a couple of  years ago but didn’t make this World Cup. In the case of Tuilagi, he’s one of a family of top-class players and his brother is in this World Cup playing for Samoa. Wales too have Toby Falatao, whose dad played for Tonga, I think.

…AND YOUR POINT WAS …?

So where am I going with this? A good question.

Club football (that’s soccer, for any Americans reading this), as played in the English Premier League, is now at a higher standard than ever, mostly because clubs import from anywhere in the world. Players are an internationally traded commodity. But the England football team, although it has done really badly in big tournaments for years, does not “import” foreign players who might be good enough to play for England but are not good enough to get into their own country’s team. Is that because the rules forbid it? I’d love to know.

COUNTRY OR BUSINESS OR FRANCHISE?

In international rugby it’s so different. If I’m right,  soon the labels England, Wales etc, will be no more than that: labels for a business, a franchise, that buys the best players it can afford, in order to play against other “countries”, most (but not all) of whom work on the same principle.

Sometimes, however and joyfully, the extra passion engendered by players inspired by playing for their country (note that my non-cynical side dropped the quotation marks there) will help them to prevail over a team that’s stronger on paper.

… BUT IS IT CRICKET?

Cricket has been going this way for ages. A few years ago, England won a one-day cricket world cup; don’t ask me if it was the t20 or the 50-over, as I am not a fan of The Pyjama Game, as I call the short variants. Call me old-fashioned if you like. Anyway, a wag of a journalist summed it up as follows: “Our South Africans are better than anyone else’s South Africans. They are better than South Africa’s South Africans. And if Australia wants to start winning at cricket again, they had better find themselves some good South Africans too.”

I rest my case … whatever it was.