This week's personal finance news
News
30/07/2010 16:23:24
Financial planning 'helps people take control'
Financial planning helps people take control of their finances and plan effectively for the future, it has been suggested.
In the wake of the recession, individuals may have engaged the services of a chartered financial planner to help them manage their incomings and outgoings, as job security became less certain and loan providers less willing to lend.
The Finance and Leasing Association (FLA) released data on Tuesday (27th July) that indicates adults may be opting for financial planning solutions in lieu of high spending on goods and services, as it published its latest consumer credit survey.
It shows during the last year, eight per cent less credit was used than in the 12 months leading up to May 2009.
Such statistics could be the proof of a phenomenon some experts claim is happening, that Britons are finally realising the value of good financial planning and the potential pitfalls of spending beyond their means.
They also reveal loans taken out are now less likely to cover large commitments, as borrowing of products such as second charge mortgages and unsecured finance has fallen.
FLA data showed second charge mortgages were significantly down at 67 per cent less than last year, while unsecured lending fell by almost half (45 per cent) during the same period.
The report observes this "[continues] a trend that began with the credit crunch".
Its suggestion that people are being more careful with their money is supported by other evidence.
Andy Pratt, chief operating officer at mortgage broker Alexander Hall, observed a significant increase in the number of people seeking house purchase loan advice over the last few years.
A property expert, he suggested this is due to the realisation credit is less easy to secure and more careful financial planning may be needed if lending providers are to grant a large fiscal endowment.
FLA experts agree with this estimation, claiming consumers are more likely to adopt a "wait and see" attitude towards long-term credit for large transactions such as home buying.
Fiona Hoyle, head of consumer finance at the group, commented: "In uncertain economic times, consumers want to take even more control over their financial commitments."
And this could account for the fall in demand for credit, as both small purchases and bigger items could contribute to future money troubles if individuals do not carefully consider all eventualities before committing to a monetary advance.
Some economic experts also believe the recent austerity measures, put in place to reduce national debt, may be having an impact on Britons' cash management.
The belief cost-cutting measures will have a dampening effect on the British economy may lead some people to prioritise financial planning above extravagant purchases.
Indeed, the money spent on procuring a chartered financial planner could be more than paid back by the savings they may be able to recommend or by clients becoming savvier when making choices about revenue and expenditure.
A recent report by the National Institute of Economic and Social Research supported FLA findings.
It predicted the saving rate would remain about six per cent over the next few years and argued per capita consumer spending would not reach the levels seen before the recession until at least 2015.
Again, this indicates a firm emphasis on financial planning over short-sighted money management.
The group believes gross domestic product (GDP) will grow by 1.3 per cent this year - this follows on from the recent announcement that GDP grew by 1.1 per cent over the last quarter.
And it forecast the economy would expand by 1.7 per cent in 2011 and 2.2 per cent in the following 12-month period.
Such modest expansion projections could give the British public further reasons to be careful with their finances and not commit to large loans that they may not be able to service in the long-term.
