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People 'Fail To Plan' For Financial Changes

Jan 20, 2008
A significant number of Britons are financially unprepared for major life-altering events, new research indicates.

In a study carried out by Abbey, about two-thirds (62 per cent) of consumers have experienced a significant change to their personal circumstances, which impacted upon their finances, over the last two years. Out of these, a third of these variations have been unexpected. According to the financial services firm, work changes are the most common life alteration people have experienced. About one in three Britons have started a job during the last two months. Following on a new occupation, 7.7 million people have seen their salary increase. However, some 5.9 million have taken a pay cut.

Following such a reduction in income, or any other financially-negative event, it could be possible that people develop problems managing various demands on their spending, such as loans, plastic cards and household bills.

Research from the financial services firm also indicated that more than a fifth (21 per cent) of people have experienced a bereavement during the last 24 months. Some five per cent have been divorced, while 11 per cent have had an illness meaning that either them or their partner has been unable to work. In addition, an estimated 16 per cent have moved home and seven per cent of Britons have had a child. The study also pointed out that many people are not preparing for the future. Only 41 per cent of those surveyed believe that a financially significant event will happen to them in two years' time.

Commenting on the statistics, Nici Audhlam-Gardiner, head of mortgages for Abbey, said: "We all know that it pays to be prepared but what's interesting is just how many people experienced a big life change in the relatively short period of two years. Our research shows that 15 million Brits suffered financially because they failed to plan for these changes. However even when you do prepare, sometimes big things hit us from out of the blue, so it's important to make sure your finances are in shape and able to withstand whatever events life throws at you."

Ms Audhlam-Gardiner claimed that for those looking to protect their monetary standing in months and years to come, a "degree of flexibility" is needs. She suggested that for consumers who are moving home to start a new job, a flexible mortgage might help them avoid "paying over the odds".

Doing so may allow such people to manage other sources of financial demand, such as personal loans, overdrafts and credit cards, with greater ease.

For people worried that their finances may not be able to cope with an unexpected monetary change of circumstance, applying now for a cheap loan might provide useful help in the future. In its Precious Plastic 2008 report, PricewaterhouseCoopers reported that should mortgage costs rise over the coming months, a significant number of homeowners could see that their capacity for money management is stretched beyond breaking point. Richard Thompson, partner at the firm, claimed that "tough times" lie ahead for many consumers.
About the Author
Steve Smith writes for 1 Stop Finance Shop. A one stop shop for all your loan requirements, from pay day loans, to secured homeowner loans, and cheap tenant loans.
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