Financial Management Issues for the Consumer, Debbie Forsey


Nov 9, 2013 (7 years and 10 months ago)


Financial Management
Issues for Consumers

Debbie Forsey

Student Debt Adviser

Queen’s University Students’ Union

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

How to Achieve Financial Stability

Effective Budgeting

Keeping track of finances

Planning ahead

Choosing the right financial products

Staying informed about financial matters


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

How to Budget

Work out how much money you have regularly
coming in each week/month



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

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?

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

Keeping Track of Finances

Get the right account for your needs





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

Planning Ahead

Consider life events and their financial impact

School and College

First job after school

Leaving home


Graduate job

Buying a home

Starting a family



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

Look beyond the attractive advertising

Look at the detail

Use several comparison sites

Make sure it meets your needs

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


impartial advice

FSA Moneymade Clear Website

Regulated independent financial adviser

Sign up to

Exploring Consumer Credit Options

Secured Loans

Unsecured Loans

Student Loans


Credit Cards

Store Cards

Hire Purchase

Credit Union

Door Step Lenders

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

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

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

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!

Exploring Consumer Credit Options

Credit Unions

Community based

Not for profit

Encourages saving and will only allow affordable

Can’t lend out all members’ savings or invest in anything

Offers small loans

Interest rates vary

Added benefits

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

Must have a licence

if not

they are illegal

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?

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

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

Can you afford the payments?

Payments may be weekly, monthly, yearly or
payable in one lump sum at the end of the

If your interest rate is variable can you afford an

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

Analysing Financial Data

APR works best as a tool for comparing the cost of
loans on a like
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%.

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.

Analysing Financial Data

What a difference 'the pay' makes

£3,000 debt at 17.9%


Time to repay in full

Interest Cost

Minimum (2% or £5)

41 years



7 years



4 years 6 months



2 years 7 months



1 year 3 months


Minimum repayment calculator

Strategies to deal with debt

Don’t ignore the problem

Contact your creditors

follow up in writing

Seek advice from a

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.

Strategies to deal with debt

Priority debts


Anything secured
on your home




Income Tax


priority debts

Credit Cards

Store cards

Unsecured loans

Mail Order

Hire Purchase for
non essentials

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

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


there is always a solution

Useful Websites

Money+ Project

If your school is interested in participating in Money+ please email

Thank you

Any questions?