ANZIO Digital Budgeting Comeback

by Patricia Montgomery, LincsMag Writer.
Date: 01 December 2011

Budgeting Comeback - Lincolnshire Magazine - LincsMag.com

With stagnating house prices, bleak unemployment data and a Eurozone in crisis, it’s no surprise that consumers have continued to re-assess their approach to the way they manage their finances.

According to new research from Mintel, the tough economic climate has prompted almost half of the population to change their attitudes towards borrowing money.

It seems that the economic climate has created a new breed of prudent consumer with a return to the traditional virtues of budgeting and sound financial management. The research highlights that almost two fifths of the population can be described as “newly prudent” - with attitudes changed post recession.

These consumers have re-evaluated their approach to managing debt, and take a hard line on spending - if they can’t afford to buy it now, then they won’t borrow to pay for it.

Consumer Behaviour

Toby Clark, Head of Financial Services Research, said: “Economic difficulties have made their mark on consumer behaviour in both the here-and-now and into the future. In the short-term, this return to a more debt-averse mindset could spell further pain for retailers and other businesses relying on consumer spend. But over the longer-term, a more prudent approach to managing household finances can only be a positive, for consumers and for the economy as a whole.”

Within the research, a quarter of consumers claimed to be "Well Prepared" for the slowdown and 37% claimed to be "Stretched". However “The Newly Prudent” made up the largest group at 38% - who have been shocked into reassesing their spending and borrowing habits.

Overall, two thirds of British consumers said that if they can’t afford to buy something without borrowing to pay for it, then they won’t buy it - and almost as many again disagreed with the statement that ‘I tend to spend now and worry about it later’. Just over half claim that they have got some savings to draw on in case of emergencies.

Financial Mindset

The research also highlights the difference age makes to financial mindset - but the responses don’t follow the straightforward, linear progression from old to young that some might expect. Over seven in ten over-55s won’t buy something if it means borrowing money, the same proportion have emergency savings and just 7% say that they ‘spend now and worry about it later’.

But while under-25s are more likely to have a ‘spend now, think about it later’ approach (just over a quarter of this group claim to do this), they’re actually more likely than 25-44-year-olds to have some savings to draw on (56% of under 25s versus 49% 25-44-year-olds), and are as likely as consumers overall (62%) to say that they won’t borrow money to buy things that they can’t afford.

Debt, predictably, has a huge impact on household finances. Overall, a third of borrowers are worried about their debts. Three quarters of Brits have money outstanding on at least one type of credit, 35% secured credit, while almost two thirds have unsecured debts.

Credit Cards (47%) are the most common type of debt to owe money on, followed by Mortgages (34%). Current account over draft facilities (26%) and Store Cards (12%) make up the remaining top five.

Sensible Attitudes

But overall it appears Brits are continuing their sensible financial attitudes when it comes to credit. The majority (64%) claim to usually clear their credit card balance each month (compared to the 11% who pay the minimum) and nearly one in five (19%) have tried to reduce the amount they use their credit card over the past two years.

Over one in ten (13%) of us have applied for a credit card in the past 12 months. Alarmingly though, it appears not all of us are completely aware of their financial credit situations - as a massive 15% claim they are not sure what the annual APR is on their credit card.

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