1. Financial Management Issues for Consumers
Debbie Forsey
Student Debt Adviser
Queen’s University Students’ Union

2. Issues to be covered How to achieve financial stability
Exploring consumer credit option
Choosing the best credit option
Analysing financial data
Strategies to deal with debt

3. How to Achieve Financial Stability
Effective Budgeting
Keeping track of finances
Planning ahead
Choosing the right financial products
Staying informed about financial matters

4. Budgeting Budgeting is a positive rather than a negative.
Stops unwanted and unnecessary debt
Helps with planning for the future
Helps reduce spending in some areas
Allows increased spending in others
Lets you stay in control of your finances

5. How to Budget
Work out how much money you have regularly coming in each week/month
Salaries
Benefits
Maintenance allowances.
Work out how much you spend each week/month
Keep a spending diary for one month
Look back over bank statements
Think of everything that requires payment over the year
Use a budget sheet
Be realistic

6. How to Budget Spending more than you earn?
Make changes – sooner rather than later
Review Direct Debits
Are you paying bills by the cheapest method
Check if you can get it cheaper elsewhere
Review broadband, phone and TV packages
Save on food bills - plan menus, stick to a list, shop at discount stores, avoid ready meals etc.
Are you covered already?

7. How to Budget Spending within your means? Don’t become complacent!
Review your budget regularly
The money spent on that daily Starbucks could buy a new laptop without having to use credit!

8. Keeping Track of Finances
Get the right account for your needs
Basic
Current
Student
Savings
Post Office
Check statements regularly and thoroughly
Ask the bank about anything you don’t recognise or seems strange
Use on-line banking
Be familiar with the fees and charges
Be aware of fraud and scams

9. Planning Ahead Consider life events and their financial impact
School and College
First job after school
Leaving home
University
Graduate job
Buying a home
Starting a family
Retirement
Death!

10. Choosing the Right Financial Products
Choosing a financial product is like eating a bag of Revels!
Any company’s job is to make money out of you
Look beyond the attractive advertising
Look at the detail
Use several comparison sites
Make sure it meets your needs

11. Staying Informed About Financial Matters
Don’t automatically disregard the literature that comes with your bank/credit card statement
Gather information from banks, building societies, credit unions
Seek free impartial advice
FSA Moneymade Clear Website
Regulated independent financial adviser
Sign up to moneysavingexpert.com

12. Exploring Consumer Credit Options
Secured Loans
Unsecured Loans
Student Loans
Overdrafts
Credit Cards
Store Cards
Hire Purchase
Credit Union
Door Step Lenders

13. Exploring Consumer Credit Options
Secured Loans
Secured against property
Lower interest rates
House can be repossessed if payments are missed
Unsecured Loan
Not secured against property
Interest rates, fees and charges vary
Can be taken to court if payments missed

14. Exploring Consumer Credit Options
Student Loans
Administered by Student Loan Company
Interest is charged based on the rate of inflation
Repayment commences after graduation
Authorised Overdrafts
Set agreed limits
Some banks offer interest free overdrafts
Check out charges and fees
Unauthorised Overdrafts
High charges if overdrawn without agreement
Can lead to further difficulties

15. Exploring Consumer Credit Options
Credit Cards
Expensive way to borrow
Set credit limit
Must make a minimum payment each month
Penalties for missed payments
Added protection
Store Cards
Like a credit card but only for certain retailers
Very expensive interest rates

16. Exploring Consumer Credit Options
Hire Purchase
Often used for products such as cars and large electrical items
Pay goods off monthly within a specified period
Goods remain the property off the supplier until the last penny is paid
Expensive form of credit
Goods can be repossessed if payments are missed
Read the small print!

17. Exploring Consumer Credit Options
Credit Unions
Community based
Not for profit
Encourages saving and will only allow affordable borrowing
Can’t lend out all members’ savings or invest in anything risky
Offers small loans
Interest rates vary
Added benefits

18. Exploring Consumer Credit Options
Door Step Lenders
Payments are made to an agent who calls at your home weekly or monthly
Very high interest rates
Often provide credit to those with a poor credit rating
Must have a licence – if not- they are illegal

19. Choosing the best credit option
Before entering into any credit agreement consider the following:
What is the APR?
The length of the loan agreement
Can you afford the payments?
What if things go wrong?

20. Choosing the best credit option
The APR (Annual Percentage Rate) takes account of the following:
the interest rate
how you repay the loan
fees associated with the loan
compulsory premiums for payment protection insurance
The lower the rate, the better
Vary from lender to lender
Can change during the term of an agreement

21. Choosing the best credit option
The length of the loan agreement
Generally the longer it takes to pay back, the dearer it will be
Be sure you can commit to the repayments for that period - are your circumstances likely to change?
Can you afford the payments?
Payments may be weekly, monthly, yearly or payable in one lump sum at the end of the agreement
If your interest rate is variable can you afford an increase

22. Choosing the best credit option
What if things go wrong?
The unexpected does happen
Are you covered
What are the penalties for missed payments
Can the agreement be altered at a later date

23. Analysing Financial Data
APR works best as a tool for comparing the cost of loans on a like-for-like basis (e.g. loans that run for the same length of time)
Example 1:
Borrow £1,000 for one year at 20% interest, and at the end of the year you repay a lump sum of £1,200
You will be paying an interest rate of 20%
The APR will also be 20%.
Example 2:
Borrow £1,000 for one year at 20% interest, and pay throughout the year in equal monthly instalments (12 x £100 = £1,200)
You will still be paying an interest rate of 20%; but
The APR will be roughly 40%.

24. Analysing Financial Data
Example 2 is more expensive because you are paying back the £1,000 gradually throughout the year.
In Example 1 you have the benefit of being able to access the £1,200 for the whole year, which you could invest and earn interest on.
By paying in instalments you're losing out; this increases the cost of the loan - hence the higher APR.

25. Analysing Financial Data
What a difference 'the pay' makes
£3,000 debt at 17.9%
Repaying
Time to repay in full
Interest Cost
Minimum (2% or £5)
41 years
£6,300
£60/month
7 years
£2,100
£80/month
4 years 6 months
£1,250
£120/month
2 years 7 months
£700
£240/month
1 year 3 months
£315
Minimum repayment calculator

26. Strategies to deal with debt
Don’t ignore the problem
Contact your creditors – follow up in writing
Seek advice from a free advice agency
Citizens Advice
Consumer Credit Counselling Service
Maximise your income
Do not pay debt with debt
Calculate how much you have available to pay your creditors after paying for all the essentials such as rent, food and utilities.

27. Strategies to deal with debt
Priority debts
Mortgage/Rent
Anything secured on your home
Rates
Electricity/Gas
Fines
Income Tax
Non – priority debts
Credit Cards
Store cards
Unsecured loans
Mail Order
Hire Purchase for non essentials

28. Strategies to deal with debt
Calculate affordable payments to each creditor on a pro- rata basis.
Provide each creditor with a financial statement and make your offer
Ask for interest to be suspended.
If the creditor refuses the offer- pay anyway
If the informal approach fails explore more formal routes

29. Strategies to deal with debt
Individual Voluntary Arrangement
Self Petition for Bankruptcy
Let the courts decide
Seek specialist advice in all of the above cases
Remember - there is always a solution

30. Useful Websites www.moneysavingexpert.com www.whataboutmoney.info

31. If your school is interested in participating in Money+ please email
Money+ Project
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32. Thank you
Any questions?