Living on The Edge
No, this isn’t a reference to the song by the rock band Aerosmith, but the sad reality which is being faced by many individuals living in the UK today who are on a knife-edge with their finances. This is the expression which is generally used to describe someone who only has sufficient savings to last them to pay for one months bills. According to a recent survey, this is the situation faced by around 40% of the working population and for those aged under 40 years old, this figure rises to a worrying 53%.
A large part of the reason for this is due to the rising cost of living caused by increased fuel and food costs, coupled with the ever slowing economy forcing employers and businesses to tighten their belts with regard to overtime, bonuses and payrises. The end result is that instead of putting more savings away when we are facing the prospect of tough times, as a nation we are now actually saving less than we were at the same time last year, with many of us not saving at all. This raises concerns that many individuals could be forced to live on credit cards and increased debt levels, continuing on a downward spiral until they end up losing their homes.
So what can we do to avoid this situation and maintain financial security? The first step is really quite simple. Sit down and complete a thorough (and honest!) budget plan, listing your income against expenditure. From this list it is quite likely that you will be able to see areas where savings can be made straight away, allowing you more disposable income.
Secondly, clear any outstanding debts so that you are living in credit rather than debt. This may seem an impossible task to many, but by cutting back on some of the luxuries for a short spell and demonstrating a little discipline you may even surprise yourself! For those who may have significant debts, a consolidation loan may be required to reduce the monthly outgoings and maintain financial liquidity, but be careful; shop around to obtain the best rate to suit your circumstances, ensuring that this is lower than the interest rate currently being paid and also bear in mind that to reduce costs you are likely to be paying for longer, which means that the overall cost over the term will be significantly more.
