On the same day that 5 robbers were sentenced for their part in the £50million robbery in Kent I also read that the FBI is investigating various companies associated with mortgage selling and mortgage bundling for resale as safe investments in the USA and I would be very surprised if they don’t find some dodgy dealings somewhere along the chain of transfer.

Banks around the world had been reporting and contine to report millions and millions of dollars written off as unobtainable repayments on these packages of mortgage debt and yet no one appeared to be taking any blame for such enormous mistakes. We are told that these mortgages were sold to people who had no hope of repaying them so someone, somewhere must have been aware of that. The parcels of these high risk debts were packaged up and sold as good investments. Somebody must have known they were not so good but sold them on regardless. The whole world is affected and the blame for the credit crunch and the expected recession is pinned mainly on the mortgages that could never be repaid. The banks buying these packages must have been either inept, criminal or conned. If you buy something that is supposed to be a safe investment and it turns out to be worthless paper you would feel cheated to say the least but you would also think they might have checked before buying them.

It seems likely that a credit crunch would have appeared at some point. Consumers can only go on borrowing money for so long. Ultimately it has to be repaid and you can extend the loans, take out replacement loans and put the debt on your mortgage but at some point you have to start paying it back.

The mortgage crisis seems to have provoked a more sudden credit crunch than might otherwise have happened. The further reduction in US interest rates to just 3% is likely to ease the situation in the US and may give people a little more confidence for the future but the debts are still out there and consumerism has had a good run and it may well be on it’s last legs now regardless of how low interest rates go.

Basic principles remain the same. If you spend more than you earn you will end up in a bad place and it doesn’t matter how low the interest rate is . No doubt the whizz kids in the city will continue to be given huge bonuses to shuffle paper around the world but from the evidence we see in the credit crunch it would seem they are more concerned with making their bonuses than they are in checking what they are doing to earn those bonuses.

Whatever happens it is the consumer who ends up paying. Much as we may like to think that it’s nothing to do with us. We will all be paying for these bad decisions by the banks for some time to come.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

Most commentators seem to be of the opinion that recession is around the corner and ready to pounce at any time and nearly all commentators now seem to accept that house prices are going to fall over the next twelve months. The figures suggested vary quite a lot but few dispute that they may fall around 5% or so over the year. What does that mean for the house market and what does it mean for individual house owners and buyers?

If they are right this would mean that anybody buying a house today for £200,000 would lose £10,000 by 2009. This equates to about £192 per week which is about the same amount it would cost to rent the same house and leave any money you have in the bank earning some interest.

Buying a house is not usually done as an investment alone. We all have to live somewhere and we like the idea of owning our own property but when it is costing so much you have to wonder if there is any point in doing so. If the downturn in house prices were to only last for 12 months and then turn around and prices start to rise again then the losses may soon be recouped but we have no idea if this might be the case or not.

Confidence in the future seems to be fairly low at the moment. The credit crunch and the US mortgage problems continue, banks are reporting ridiculous amounts lost in poor lending deals and people are starting to tighten their belts. Everything suggests that the times of spending and borrowing excess are over. Things could get difficult for many of us over the coming months and it could even be for some years so it is now more urgent than ever that people reduce their spending, reduce their debts and batten down the hatches for the coming financial storm ahead.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

There is a saying that, ‘If you always do what you have always done, you will always get what you have always had.’

It is an obvious but useful reminder that if nothing changes then things remain the same. If your situation is that you spend more than you earn and/or your debts are overwhelming then you have to do something and change things

Debt is one of the biggest problems facing us on a daily basis. Yes, the planet is suffering from climate change and we have to do anything we can to reduce the damage or we may all die but that is a different sort of problem that demands inter govermental action. Obesity is a growing problem in the developed world and like debt and credit problems it is something that has been encouraged and supported by big business. Governments are starting to take action to try to deal with the problem before health problems overwhelm the health industry. Debt problems are, however, an accepted problem but not one that governments seem anxious to face up to and whilst there are various organisations that can give advice people do feel pretty much on their own when it comes to dealing with their debt.

Some will say that is the way it should be. ‘They got into this problem so they should get themselves out of it.’ It may be true in many cases but as often as not debt probelems arise from lack of understanding of the consequences or personal disasters like divorce, redundancy and illness and whatever the causes, we are where we are now and have to deal with it.

Consider debt as an addiction. Like any addiction the first hurdle is to recognise the problem. We have become addicted to easy credit and debt. It has become the norm. Unlike previous generations we are not embarassed about our debt but we are concerned about overcoming the problems it brings.

Do you have a debt problem? Ask yourself these questions.

1)Â Do I have any debts?

2) Can I comfortably afford the repayments on the debt that I have?

3) Am I struggling to make the repayments on my debts each month?

4) Would I be ok if I lost my job, my marriage collapsed or I suffered serious ill health?

Few people can afford to ignore these questions and most people would not require a huge chunk of bad luck to find themselves in financial difficulty. We live on a knife edge and try to get the most out of life but that does leave us in a precarious position.

The answer is to prepare for the worst and if things go well life will be sweet but if things go badly at least we will survive. Track your income and expenditure and set up a budget. Reduce your spending, increase repayments on expensive debt. Slowly but surely pay off all your debts. I am not saying it is easy but the rewards of feeling financially safe and secure are enormous.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)