Justin talks about the growing global economy, household borrowing and credit unions.
I hope now we can concentrate on something that was skirted around before the vote by nearly all the politicians, but is frankly fundamental to all those promises and plans they made.
As a certain Bill Clinton said, “It’s the Economy, stupid”. And we have no shortage of stupid.
After all, no success in the economy, then no promises and no plans implemented.
Now the good news is that the global economy is growing at quite a reasonable rate of 2.7%. Although significantly slower than the 5.4% of 2010, it is in fact running at roughly the long term average.
However for us in the UK, we are likely to be seeing signs of slowdown in the economy, primarily down to the consumer slowing up. Although the consumers are still spending, it seems that we have been spending beyond our incomes, and therefore probably dipping into our savings as well, which is not good news. This is certainly not encouraging for our vital longer term pensions and savings plans. Now I can quite understand that with some interest rates at 0.01% (you can hardly call that an interest rate – about as interesting as the Corbyn comedy hour), we are in fact living in a world of negative rates as our money devalues every month with higher inflation rates (currently 2.7%). So buying ‘stuff’ now may be better value than just watching your real cash value dwindle.
Our household net borrowing in the fourth quarter rose to over £11bn, the highest quarterly level in nearly 30 years, and the savings ratio has dropped to 3.3%, which is the lowest level since it was first recorded back in 1963. In 2010, it peaked at 11.5%.
To make matters worse, many have been turning to those poisonous credit cards and even more poisonous store cards. I note that two thirds of the store cards charge over 25%, which is frankly outrageous – and some nearly 30%. This path leads to financial doom for individuals, as often the short term debt hardens into something longer as just the minimum amounts are paid off.
So what are the alternatives? Well the often forgotten Credit Unions are well worth looking at. These are non-profit-making organizations, usually set up by members with a common cause (living in a local area, a community or an industry – like the police).
You can save with them as well as borrow. Savings rates aren’t always the top market ones, but certainly very competitive compared to the frankly pathetic mainstream bank deposit rates. As for borrowing, the rates for loans with the interest paid are often around 12.7% APR (1% a month), but they can be considerably higher.
Now there can be better offers around, but I have found that the consistency of this sector can provide far better support for consumers and it also has the Financial Services Compensation Scheme’s safety net of £85,000 (although many Unions will restrict your deposit levels anyway – often to around £15,000).
So for the financially challenged I would encourage one further purchase – a pair of scissors to cut up the store cards and credit cards, and go find your local Credit Union. (Here is a website to help: www.findyourcreditunion.co.uk)
And finally…..I know it is over a year ago, but I have only just caught up with my reading. Last year it seemed that a woman was literally left red-faced after dying herself bright pink when she misused a bath product from a cosmetics company.
Abi Shenton’s skin was left “fluorescent pink” for three days after she mistook a bath bomb from the toiletries company for soap.
Ms Shenton, who is no longer pink, said the product she used was called Razzle Dazzle Bath Oil and she does not blame the company for the incident.
Ms Shenton: “The correct procedure is that you are supposed to dilute it into water, but I thought it was a soap and rubbed it all over my body and face. I misused the product.”
Ms Shenton said she removed the pink stain using lemon juice, olive oil and a gritty face wash – and presumably she now looks like a pot of French dressing.
Have good week.
Justin Urquhart Stewart
Co Founder and Head of Corporate Development
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