A financial reality check for UK adults

Last night an un-confirmable media report stated that the poorest person in the UK will statistically live longer than the richest person in the USA.  Lifestyle, diet, and health care were attributed to the longevity of the average UK adult.  It can make a person wonder why the UK is so desperate to mimic the supposedly good life of their USA counterparts. 

Not only are UK consumers desperate to live the lifestyle, they are going in debt to do so.  This in itself ‘red flags’ adults and reveals the fact that the entire lifestyle is a Hollywood fallacy, at least, it should.  Of course, it is hard to tell young adults that fun and fashion are not worth the price you’ll pay later on. 

Many UK adults in the 30 something are already carrying larger debts than older generations with families, school fees, and other expenses.  It isn’t until many UK adults are hopelessly in debt, with personal loans in excess of ₤40 000 that a light turns on and they realize the full cost of a decade of playing the characters out of their favourite television shows.

That is why 10 000 people a month are petitioning for bankruptcy while living in one of the healthiest economies in the world.  In fact, the number of bankruptcies has more than doubled in less than 10 years.  In 1998, 24 500 people went bankrupt or took out an IVA, that number increased 56% to 107 000.  Analysts are predicting that 130 000 to 150 000 people will go bankrupt in 2007.

Surveys are revealing that the younger generation is not worried about declaring bankruptcy.  This is no news, the government had to make it impossible to write off their student loans because they were using bankruptcy as a ‘get out of debt free’ card.  Life isn’t a game. 

Of course, there is another side to the argument.  The population of UK and Wales is 53 million.  When you take a look at those number, then 150 000 is hardly a bump in the road – unless you are one of the unlucky ones.

Many analysts agree, but they look to the intangible aspects of debt that rarely make the statistical charts.  The number of turnkey families is increasing.  Turnkey is a US term that refers to children who come home from school to an empty house, because mom and dad are both at work.  Many of these kids spend two hours unattended.  Presumably they stay home and do their homework, right!

If the UK is going to adopt US standards of living, they need to pay the price.  Two income families who are only ‘real’ families on the weekend, no long vacations in the country, no trips abroad, and retiring after 65 years old are all things that go with the US lifestyle.  The American lifestyle is fun, for a while, but their ten years of fun costs them forty years of debt. 

Even with 50 years practice, the Americans haven’t learned how to make their ‘foot loose and fancy free’ lifestyle work.  Take a look at the US housing slump.  The Sub-prime market has crashed entirely.  Their dollar has dropped so much that even the Canadian dollar is almost on par.  That is enough to make international economists shudder. 

What the UK’s 30-something generation don’t see is how the ‘Hollywood lifestyle’ turns into a dog-eat-dog lifestyle that leaves everyone in a precarious position for a few decades.  This is no surprise, Clinical psychologist Oliver James talks of Affluenza - a term that refers to the fact that while societies are growing richer and richer, individuals are becoming less and less happy. What’s more, the Affluenza Virus is spreading around the glob as more adopt consumer capitalism, particularly in English-speaking societies.

There is a cure. Living within the boundaries of your salary can not only lengthen your life, but it can build wealth.  If you spend ₤6 000 a year on interest payments, for a ₤40 000 unsecured loan and personal loans, then you lose a conservative ₤240 000 in 40 years.  Many analysts put this number at much higher, around ₤500 – 700 000.  Add the interest on ₤250 000 on a 25 year mortgage, or ₤450 000 interest on a 40 year mortgage, and you’ve lost well over 1 million pounds.

How do you save?  Don’t get credit cards.  Don’t buy a house until you have a good down payment. And, if you’ve already started the downward spiral, go to a debt management charity and get help. Think about how much the 30 something generation could save in the 30 – 35 years they have left to work – enough to make them rich.

Most people do not realize that they can eliminate almost all their debts in less than five years. And, once you have freedom, it is easier to keep it.