Feeling the Squeeze: Riding Out the Financial Storm
With the so-called ‘credit crunch’ wreaking havoc with the global economy, it’s probably safe to say that money is more of an issue than it has been in a long time for most people.
Homeowners, in particular, have perhaps felt the squeeze most. With house-values crashing and interest rates rising, many people have found themselves not only in negative equity but also facing financial ruin as they struggle to meet their monthly mortgage repayments.
Indeed, whilst the US housing market has perhaps experienced the worst of the credit crunch, with an estimated 250,000 foreclosures in June 2008 alone, many UK homeowners have also had to endure repossessions, albeit not as many as on the other side of the Atlantic.
One of the effects of the declining property market is that many homeowners are choosing to get off the property ladder and rent homes instead; hoping to re-buy when property values have fallen even further. Selling now will also release any existing equity in the home, helping to ease any cash flow problems brought on by the credit crunch.
But it’s not only those with mortgages who are suffering the effects of the global financial crisis. Food and fuel prices have been rising at their fastest pace since the early 1980s, leaving many people who were already living on the breadline seriously struggling to make ends meet, and a recession looking more and more likely. Of course, it can be difficult to see past the doom and gloom of many financial predictions, and economists have rarely been in such high demand for their expertise and forecasting skills.
In many ways, the best advice to combat the credit crunch is simple: watch every penny that comes in and goes out of the household and put an end to impulse buying for things that are simply not needed. People who live within their means face a much better chance of surviving a financial catastrophe than those who continue to borrow to fund a lifestyle they have become accustomed to.
Furthermore, if it’s possible to squirrel away any money at all at the end of each month, then it’s perhaps worth factoring this into a monthly budget, just in case the economy worsens before it improves. And ‘voluntary’ outgoings such as pension payments and life insurance should be maintained if possible, as these at least provide a little security for the future and will help protect the family should the absolute worst happen. Indeed, it may even be worth checking to see if any more money could be saved by switching pension or life insurance providers, as every penny does count.
So, whilst it’s clear that the credit crunch does affect everybody to varying degrees, at least some steps can be taken to minimise its’ effect. It can be difficult to face a lifestyle change, but by separating life’s big essentials from life’s little luxuries then it may be possible to ride out the financial storm.
Disclaimer: Matthew Pressman writes for a wide variety of commercial clients. This article is intended for information purposes only and readers should seek additional information before taking any actions based on its content.