Brits fear their financial future

H: Host, Glen Thomset
A: Angela Faherty, Financial Expert & Journalist
R: Roger Edwards, Insurance Expert, Bright Grey

H: Hello and welcome to the Business Show brought to you today by Bright Grey, I’m Glen Thomset.  Now then you probably haven’t been able to escape the fact that everyone literally everyone has been talking about the credit crunch.  Inflation is creeping up, petrol, food prices and our utility bills have all been rising, so it’s probably no surprise to you that according to new research 47% of us claim that the uncertainty of the future causes us the most anxiety.  Well joining me today to help get your finances hopefully back on track is insurance expert at Bright Grey Roger Edwards, welcome to your Roger, and also financial expert and journalist, Angela Faherty.  Roger, start with you if we can, the “credit crunch” in inverted commas, we’re all talking about it.  Is it as bad as everybody’s making out?

R: Yes I think the media makes us worry a lot.  I think what I would say to people is don’t worry too much because there are some very simple precautions you can take to make sure that you can be financially secure.  Now we’ve been through a period of affluence where people have had rising salaries, low prices, low fuel prices, and we’ve become a society used to having what we want.  Now we’re having to tighten our belts to a certain extent.  But even in good times and at the same time when things might be slowing down, everything that we buy, everything that we do, comes from our income.  Now yes you can tighten your belt if you need to, if your salary comes down or if  prices increase, but what we’re trying to say to people is maybe protect your income, because what happens if your income stops?  What happens if you become unemployed, if you become ill? You might not want to think about it but what happens if the breadwinner of the family dies?  You can take out insurance which would be quite cheap in order to protect that income, so even if we’re in a good economic situation or a worsening economic situation, if something happens to you you’ve got a financial safety net which will help you get through that

H: Angela, do you think it’s a north / south thing?  Because I get the impression that people in the south are far more worried about their materialistic things, they’re more worried about the money, where it comes from, let’s make as much money as possible, whereas I get the impression that reading through the press and what have you, people in the north like to spend more time enjoying what they’re doing

A: I think everyone enjoys, you know, using their salary to make the most of their life really.  I wouldn’t like to comment on any sort of north / south divide, but I think the thing that people need to remember and bear in mind is the fact that money is the way that we all live, and I think too many people actually are focused on using their monthly salary as a way of financing things, you know it’s hand to mouth sort of mentality if you will, and bear in mind the fact that if that money is taken away, how on earth are they going to enjoy those things, no matter where they are in the country.  So I think that’s the sort of mindset people need to adopt, it’s more a case of precaution, like Roger said, you know it’s a horrible thing to think about should someone die, if they’re ill, but if the money stops coming in, how are you going to afford those luxuries of life?

H: We don’t sort of gear ourselves up for the inevitable do we Roger?

R: No I think the thing is we’ve got a bit of a head in the sand mentality, I like to call it ostrich Britain to a certain extent.  Of course people don’t like to think about nasty things happening to them, and we don’t want to face up to these potential realities, but I think that sometimes you’ve got to think about these things that might happen, especially if you’ve got a family, if you’ve got responsibilities, if you’ve got children, if they’re at school, that sort of thing, and whilst you might not want to think about becoming ill, you might not want to think about what would happen if you aren’t able to work, it’s probably worth considering what might happen if that eventuality arose, what would happen if your income did stop and you can take precautions in order to make sure you will be financially secure in those circumstances.  Now it’s – I’m not trying to create an impression of doom and gloom here, but I think that we all go to work to live, as Angela says we go to work so that we can afford to buy a house, so that we can go out and enjoy ourselves.  We can drive a car, we can go on holiday, I think that’s very important, but if the income stops, all of those things that we take for granted and that we enjoy doing, might have to stop as well, so just by considering your options, take out some insurance, life cover, income protection, critical illness, if that unthinkable thing happens, and let’s not think about it too much, but if that thing happens you’ve got some financial security there to allow you to continue to enjoy the things that you want to do

H: Ok, well don’t forget that this is a live webchat.  If you’d like to get in touch with us, put your questions to either Roger or Angela here on any financial matters then feel free to do so.  Just underneath the screen you’ll find a little box, just fill in that box, hit that submit button and your questions come right through to me here in the studio.  I can then relay your questions to our guests.  First question through from somebody called Matt Eton, Matt thanks very much for getting in touch with us.  He says “the media is hysterical about the credit crunch and some sort of impending bust, but the reality is that we are far better placed economically to deal with the global slowdown than we were in the early 1990s.”  Would you agree with that?

A: I mean statistically yes, I mean it points to the fact that inflation isn’t as high as it was then, interest rates weren’t as high, but the fact remains that as Roger said earlier on, you need to prepare yourselves for the good times and the bad, and I think the good times in essence are coming to an end, and fair enough it’s not all doom and gloom, and yes I guess things have been blown out of proportion to some extent, but you need to bear in mind that, you know, if something suddenly does happen then you need to have something in place that will help you continue to live your life, to pay your mortgage, to buy your food and you know that’s where insurance, and basically planning for your financial future, comes to the fore

H: Do you think enough of us put reserves in place if you see what I mean?  We’ve all – well the majority of us have got houses, we’ve got money tied up in property, we think that maybe that’s going to be enough, you’ve got maybe a second property, a third property, if you have then lucky old you.  Do you think that’s enough?  Having bricks and mortar?

R: Yes I think that it’s quite interesting to see, I mean the person that’s just asked the question there is quite right, the society that we’re living in now, we have done quite well over the last decade, and people have got savings.  People, I think the average is about £7000 per family, but if you think about it you could say well I’ve got savings, if something happens to me, I stop working, I’ll dip into my savings and that’ll carry me on, but one of the other consequences of the lifestyles we’ve been living over the last decade is bigger mortgages and therefore higher monthly payments, so you might have £7000 worth of savings, but if your mortgage payments are a couple of grand a month, it’s not going to last you that long unless you’ve got that income coming in, and that’s what we’re saying again is, take some precautions so that even though you might have savings, even though you might have investments, even though you might think that you can rely upon your family, you might not be able to rely upon that forever, but some sort of insurance would give you that financial stability for a longer period

H: Angela, I mean you write about this all the time presumably, you’re a financial journalist, do you think that we push ourselves too much into a financial corner, if you like we borrow left, right and centre, you know you get that car on hire purchase or whatever, you know you’re getting a mortgage that maybe you can’t afford.  Are too many people ploughing themselves into a corner and can’t get out of it?

A: Yes I think there are increasingly it’s been a case of you know want want want, and you know I think everyone is guilty of that, but I think one of the problems that everyone is facing, you know it’s not just the mortgage that you have to pay if something suddenly happens to your income, you know the level of indebtedness in this country is higher than it’s ever been.  People owe thousands of pounds on credit cards, loans, overdrafts, so you know fair enough you might have your house and you might think I have savings to pay for that, but when you’re relying on the state to give you some income benefit, you know you’ll soon see those savings disappear.  I think it’s not just your mortgage, it’s everything else, and I think that you need to think about in the future how on earth you’re going to pay for all these debts that remain outstanding

H: So what are the answers here, I mean that big carrot is dangling in front of me and I want to take a nibble out of it, what do I do, push it away?

A: In terms of –

H: In terms of, you know, putting myself further into debt

A: I think it’s the mindset, isn’t it, it’s like, you know, I think – I’ve been as guilty as other people have about wanting things that you probably can’t afford, but if you get into a situation like that I think you need to think more how on earth are you going to repay it, and I think the current economic climate, despite the fact that it’s something of a credit crunch frenzy in the media as you say ,if anything it might be sensationalised to some degree, but it’s certainly sitting home – hitting home rather, sorry, in terms of, you know, educating people and making people sort of aware that something actually is going on, so perhaps they should be better off thinking about how they’re going to save or finance their future rather than spend now

H: Ok, Roger, quick question here, we must plough through some of these questions that you’ve been putting through to us, Richard Karv has been in touch with us, thanks Richard, he says “I’ve recently moved in with my partner and we now have a large mortgage to deal with. I’m worried what might happen if one of us was to lose our jobs, how can we plan for this potential situation?”  I guess a lot of folks ask that question don’t they?

R: I think the first thing is perhaps to speak to a financial advisor who will be able to give you all sorts of options to consider, but if you’ve taken a large mortgage you’re invariably going to be paying a very large monthly amount to the bank or the building society that lent you the money, so the first thing to think about is – “how could I repay that mortgage if something happened to me?”  so life assurance cover is the first thing to think about, maybe critical illness cover which would pay the mortgage off if you had an illness like a heart attack, and income protection if you couldn’t work for something else like a bad back or stress, or something like that.  Now again maybe the perception is that you’ve just taken on a big mortgage, you’ve got a high monthly payment, the last thing I want to do is pay into an insurance policy, that’s got to be very expensive doesn’t it?  But actually an advisor could give you a really good cost effective option which might be able to combine those elements that I’ve mentioned together, and it would be actually quite affordable, and actually if you think about it, essential protection for that debt that you’ve just taken on

H: A lot of folks are frightened of financial advisors, presumably because they think they’ve got to pay the financial advisor some money for their advice, is that right or not?

R: Well a lot of protection policies will pay an advisory fee through the policy itself, but you can speak to an advisor at the beginning of your meeting and actually decide with them how they’[re going to be paid, so they can be paid with a fee paid by the insurance company based up on the product or a fee based on the individual paying the advisor direct.  The thing is don’t be afraid of advisors, they’re here to give you advice, and the first thing you do to them is to discuss with them how you’re going to work with them and how they’re going to advise you

H: More questions coming through, Dennis Wilson, thanks for getting in touch Dennis, he says “what are the important things to look out for when signing up to insurance policies?”

A: I think Roger’s probably better placed to answer this

R: I think it’s important to find something that offers value for money.  I think there’s a perception amongst people that the cheapest is always the best, so let’s go onto the internet and find the cheapest premium, but I think it’s often worth having a look at the company that you’re going to potentially take a policy out with, and see how clear their literature is, make sure they haven’t got lots of small print, make sure you understand exactly what is covered and what isn’t covered so that nothing comes as a surprise later on, and maybe look for companies that offer a little bit extra, so yes we’ve been talking about life assurance which pays out money, but are there any policies out there which, for example might help you get back to work if you become ill in addition to paying you the money as well, so I think there are some good value for money policies out there, and again an advisor would be able to sort out the difference between the ones that are just cheap as chips, and the ones that offer you a little bit more for your money

H: Ok Stephen Saunders has been in touch with us, he says “I’m facing negative equity on my house, I don’t know what to do and how I can turn things around.  How can I go about sorting this mess out?”

A: I think probably – I think here you need an advisor in this situation, there’s no way that someone can handle that, that sort of problem on their own, so as Roger said always seek professional advice.  There is a website that can help you actually which is unbiased.co.uk and you just type in your postcode and it gives you the name and address and phone number of a local advisor, and they should be able to help you out.  I mean the only place you can turn to in that situation is a professional advisor

H: Ok

A: And they can talk you through the options that are available to you

H: Ok we’ll give those web addresses out to you at the end of this webchat, so no worries about that.  Finding, I was reading this before we came on today, a new study shows that Brits are worrying more about money than any other aspect of their lives including the death of a partner, health or career.  I find that staggering!

R: I think the thing is though, we’re bombarded in the media day by day telling us petrol’s increasing by price, fuel bills I think it was in the paper today that gas is going to be a thousand pounds a year.  We’re seeing the cost of everything increasing so that’s in our face all the time, so naturally people are going to start worrying about the things that they can see.  You’re not going to start worrying about the potential death of a partner or something else like that because it isn’t in your face every day.  You may see, you may have relatives that have become ill or that sort of thing, but I don’t think it prompts the concern that a constant barrage of information about higher prices does – creates that feeling that people might have “I’m not going to cope if prices keep on going – my salary hasn’t increased that much this year, it’s not gone up by as much as inflation therefore how am I going to afford the things that I want to buy?”  So I think that’s just in your face all the time, as opposed to those other things which you probably don’t want to think about anyway because they’re a bit unpalatable

H: What should somebody do if they’re in this real financial mess, they’ve got no end of debts, they’re not making a lot of money, maybe they’ve lost their job – what advice do you have for these sort of people?  I mean do they go to the Citizen’s Advice Bureau, do they get a financial expert to come in and talk to them – you know you’ve gone down this road, this alleyway to a dead end and you’re panicking almost because you don’t know where the next pound coin is coming from.  What should you do?  Where should you go?

R: I think we go back to what I said at the beginning, not to panic in the first instance.  Citizen’s Advice is a great place to go as a starting point, and there are all sorts of ways you can consolidate debt, some are good, some aren’t so good, but I think the Citizen’s Advice Bureau would give people very good pointers as to what they could do to sort themselves out.  And of course we can all economise in what we do, we can, you know maybe not have a coffee on the way to work every day, we can change what we eat, we can change what we wear. There are ways to cut your expenditure in order to get yourself out of debt, but I think the thing is don’t worry too much about it, get advice, sit down and have a – almost like having a family planning session or a family annual general meeting or something like that, so sit yourself down, make a plan with your advisor with the Citizen’s Advice Bureau and come up with a way of helping yourself out of the situation you are in

H: Ok.  Couple more questions here, I’ve got one from a guy called Tony Smith, Tony thanks for your message here.  He says “I want to invest in my future but there are so many options, I don’t know which one to choose.  How do I work out which one’s best for me in particular?

A: Again I would say seek professional advice on that.  I mean it would depend on how much money that you had to invest, what type of investment you were looking at, whether that was you know traditional investments or property, but the only person who could help you out is a professional advisor, I mean an IFA who has a whole of market experience, who is familiar with all types of investment vehicles, and they can put you on the right track, especially if you don’t know where to begin

R: I think it’s also worth thinking about, if you’ve got some money to invest, a lump sum or whatever, you’re probably going to invest that money because you want it to grow, because maybe in the future you want to retire on it or maybe go on a big holiday round the world, but again going back to what I said before, what would happen if you stopped being able to work?  You might have to dip into that investment and actually divert it from the purpose that you want to invest it for, i.e. the holiday or retirement.  If you put in place some protection in advance so that again if you stopped working you don’t have to dip into that investment, then you’ll be able to realise that nest egg in the future if you need it, as opposed to maybe having to tap into it earlier than you would have normally wanted to

H: Hard question to you. What about pensions, when should we start saving for a pension?  A lot of companies pay half of what you pay, I know but when’s a good time to start pensions?

R: As early as you possibly can.  Obviously the younger you are the more you want to spend your money on going out and enjoying yourself and that sort of thing, but even if you’re putting away a very small each month, it doesn’t matter how small that amount is over time it will grow, and the earlier you start the bigger the eventual pension will be

A: And it’s also worth bearing in mind that quite a lot of companies offer or are willing to contribute to their employees’ pension fund, so it’s always worth asking your employer whether they do that, and they can top that up so therefore you probably have twice the amount going in on a monthly basis

H: Ok.  I’m afraid we’re out of time.  Roger Edwards, insurance expert at Bright Grey, thanks for joining us on the program today, and also Angela Faherty whose a financial expert and also journalist, thank you for your company.  And if you’d like good advice on where to perhaps find a financial advisor, then go to the Unbiased website, we mentioned it earlier, it’s unbiased.co.uk, unbiased all one word .co.uk.  Thank you for your company, we’ll see you soon