So how do you pay off a £950bn debt?
Thats the current government debt in the UK. Give or take a few million. Scary Huh? Compared to New Zealand which has a current debt of $25.6bn. or about £13bn at current exchange rates. But remember – New Zealand is a tiny country. So how much is that per person?
In New Zealand that’s about £3250 per person (keeping in £ to make it easier).
In the UK it works out at about £15,570 per person.
Now once you put it into terms like that it may or may not sound so scary to you. After all – we had personal debts of about £14,000 when we started our emigration journey, and it took us about a year to pay that off. So effectively the debt that the UK government has built up is just like 70,000,000 “Avalon and Hubbies” going on a spending spree.
This is on top of peoples personal debts in the UK which now are thought to be in the region of £1,460bn – so more than the UK government has racked up.
But at some point it all has to be paid back – and therein lies the problem. The personal debt has been spent on property, cars, clothes, food, and lifestyle. As individuals you can decide how to cut back – what is essential and what you have basically been frittering money away on just because you could and becuase you wanted to.
But Government spending is harder to cut back on becuase we all demand higher levels of service and benefits form the government and don’t see why we cant have it. And when Governments take drastic cuts and tell the people that the money just isn’t there – riots like we are seeing in Greece occur.
I wonder how much this has affected the UK election results? Theres a helluva lot of money to be paid back, and it is going to take someone with the strength of an ox to make the decisions necessary to get the country out of the crap. Who do you trust to do that? Becuase believe me, paying off a debt of about £14,000 is not an easy task. For individuals the mechanics are straightforward – there are ways and means of setting budget s and paying down debt. But even so the decision yo have to make are not always easy. There will be arguments. There will be fights. There will be blamestorming sessions like you would not believe. And then there will be anger as one or other of you realise you cant buy the things you want to buy anymore.
How do you scale that up and handle it in an entire country?
The New Zealand government is giving it a shot: getting rid of government waste, getting rid of excess civil servants (but then that can add to the unemployment benefit cost), and generally taking a big red pen to lots of paperwork and numbers. But New Zealand has also been pretty protected from the Financial fallout, especially when compared to many European countries – including the UK.
I don’t know who the best hope is for the UK. I am personally glad it’s not likely to be Gordon Brown as he does seem to have been pretty lousy as a finance minister and caused a lot of this – and his decision to borrow his way out of the crap is just insane. If its insane for us to to it – its no more right for a government to do it. The golden rule of problem debt is:
Never borrow more to pay it off.
So while the UK election plays itself out and we wait to find out if the Conservatives and Lib Dems can find a way to work together – I think its worth sparing a thought for the fact that they one helluva mess to sort out and they may have some tough decisions to make that will not please everyone.
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Getting out of Credit Card Hell
Filed under: General Budgeting, Interest Rates, Credit Cards & Mortgages in NZ, Property & General Investing, Retirement, Pensions and Kiwisaver, The Book and Website
I am now a firm believer in that you should never had a balance on your credit card that you cant pay off every month. But if you are the position of having a balance you need to find a way of getting rid of it as soon as possible. Credit card debts, especially now – are the sort thing you do not want to have in your financical life.
I was sent a link from one of my Twitter Followers to Mint.com with an amazing diagram showing you one of the ways you can do this. You start at the bottom of the Picture and work your way up to freedom.
This is slightly different to the method listed in Avalon’s Guide – but hey – there is more than one way to turn your life around – and it is up to you to check out which suits you best.
Click on the Picture to go to Mint.com and see the full version:
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Taking on more debt is not the way to deal with debt problems.
Filed under: Banks, Economics, General Budgeting, Retirement, Pensions and Kiwisaver
Just in case anyone was not aware of this – New Zealand had its first budget this week from the new National Government. It also marked the first budget since the world went to the cleaners in a huge recession. So it was looked upon with a fair amount of dread and hope in roughly equal measure. Even more so with Standard and Poor’s threatening to send the entire country to the naughty step if the government didn’t say what they wanted them to say.
The good news: S&P have pulled off the attack dogs and taken us off the watch list, the government didn’t increase the age at which you can get superannuation, and they didn’t promise to indebt the next 25 generations of kiwis by borrowing stupid sums of money, like the UK’s £606 billion. Though the bad news is that as well as losing our tax cuts for the next two years – the New Zealand government is planning on its debt increasing to twice its current levels over the next 10 years – which still puts us all in a bad situation.
It is never a good idea to deal with debt problems by taking on more debt. And if it’s a bad idea for individuals – then it is just as bad an idea for countries. I do wish they would start to get this! Its all very well to want to spend more (of our) money on schools, healthcare and whatnot – but if we have to tighten our belts – then it is really about time Governments started to do so as well. National are going through their departments and cutting back – but it looks like it is not going to be enough. They appear to have found savings of $2bn over the next 4 years. They plan to spend $70bn a year.
Try telling your bank that you want to do something similar with your budgets! They would repossess your house in a blink!
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