We are frequently told that banks and other financial companies try to help their customers avoid financial problems and we are also told they charge customers on the basis of how the company views the financial risk that the customer presents. The logic of that seems clear but it puzzles me that the banks seem so eager to push their customers into a far riskier financial situation as soon as they have any financial difficulty.

It should be obvious to any normal person that if someone has had difficulty in any one month they need even more money the following month to get back on track. Most people have a regular and fairly stable income and most of us would have regular expenses that we balance with our income.

The majority of people do everything they can to avoid these debt problems but the reaction of banks to this difficult situation for their customer is invariably to reduce their available cash by imposing charges which are then taken from the account without any opportunity for the account holder to manage the situation and avoid further financial difficulties.

The situation is then that, invariably, the customer has even less money available the following month to cover their expenses, to pay bills and make a payment to catch up for the previous missed payment. It is hard to see how the banks could see this as helping their customer overcome their difficulties.

This slippery slope is one many of us will have experienced with the result that as each month goes by more and more charges are applied and it gets ever harder to balance the budget and get the account back in credit.

With every additional charge it becomes more and more difficult and it can feel like you will never get straight again.You pump whatever money you can find into the account to get straight but charges just swallow it all up and still you owe more. It doesn’t take too many months like this to find yourself in a financial hole that feels like you can never climb out of.

We all live a fine line between comfortably affording our lifestyle and financial disaster. For many people, it wouldn’t take much to push them over the edge and the Bank’s way of  ‘helping’ their customers who hit a difficult patch seems to be just about the worst possible help you could have. The phrase that comes to mind is, ‘”With friends like that, who needs enemies”.

Everything may seem rosy today but none of us know what is around the corner. Financial circumstances can change and it doesn’t always have to be a big change to have a large impact on your financial situation. If you do not have significant savings to give you a comfort zone and your expenses are broadly in-line with your income, you could be at risk of financial problems if anything changes.

Many of us buy a lottery ticket with the hope that maybe this time we might be lucky and gain from a big win. The reality is that it is far more likely that something will happen which leads you towards financial disaster than it is that you will be one of the big winners on the lottery.

We need to prepare for the worst and by doing so we may avoid it ever happening. Take some simple steps to get your monthly budget in reasonable shape.

1. Build up a readily available cash reserve for any financial emergencies.
2. Avoid using credit cards for long term debt.
3. Make sure there is always enough money in your account to cover any payments and if there is not then at least cancel the direct debits which will lead to charges if the payment fails to clear. Find another way to make the payments.
4. Carry out an analysis of your financial situation which looks at income and expenditure to see just how well off you really are.
5. Prepare a budget that covers all your outgoings and expenses and has at least a little surplus in reserve. If your budget doesn’t balance do what you can to reduce your spending and get your budget back under control.

Remember that you need the money far more than your bank does but if you lose control they will take advantage of your situation and rip you off left, right and centre. They do not care about you. All you are is a cash cow to them and they will make your financial situation far worse. They will increase your financial riskiness and you will find your interest rates on debts rising as the financial industry does everything they can to, apparently,  try to bankrupt you.

Don’t let it happen to you.

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

The news that Baroness Scotland had employed a housekeeper who was working illegally in the UK came as something of a surprise. When you consider that she was working in government when the law was introduced, which required every employer to check the credentials of a prospective employee, and she advises government on matters of law you would expect that she of all people would not fall foul of the law
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She may well have believed she had complied with the law by checking documents before employing this person but the fact that someone as knowledgeable about the law can make an error such as this shows how complicated modern life has become. We are all expected to follow the rule of law but these days there are so many laws and most of us have only the vaguest idea of what their requirements are.

Many people would not consider consulting a solicitor for fear of huge charges but the free community legal advice service offers a telephone helpline offering free legal advice on 0845 345 4345 for anyone on benefits or living on a low income. They offer advice on a range of legal issues but also offer a variety of leaflets and factsheets that might benefit many people who do not fall within the scope of the free legal advice service.

The website offers a lot of useful information and the leaflets cover a range of issues from debt to divorce, renting property to wills and probate and a lot of other areas as well. Well worth a look and a useful website to bookmark for the future. You can see a list of the online documents available here… CommunityLegalAdvice.org.uk

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

One way of making a little extra income is by renting out a spare room in your house to a lodger. The government has a scheme whereby you are allowed to earn a £4,250 each year, tax free, if you rent out a room and you can find out more here… Rent A Room Scheme

Lodgers come in all shapes and sizes and choose to rent a room for many different reasons from needing accommodation near their work for a few months or as a new start after divorce and the loss of their family home.

Renting a room does not have to mean you are sharing all of your house with a stranger. In many cases lodgers become family friends for life but you have the choice about how much access they have to the rest of the house. They obviously need access to the kitchen and bathroom but you decide if they are allowed to use the garden, the lounge or any other rooms you have.

It is a good way to bring in some additional income to help you overcome your debt problems or just to give you a better standard of life or to build your pension pot and if you have a spare room or two it might be something worth looking in to.

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