Navigating the Often Rough Seas of Personal Finance

07bc9239ea374b21ac3267f491a07218There was a time when personal finances meant living within a budget, purchasing a few necessities on credit, and tucking part of your earnings away in savings for retirement or to meet the demands of some unexpected rainy day. Unfortunately, the recession that hit in 2008 taught many of us a painful lesson, that even doing everything right doesn’t necessarily protect you from taking a financial hit. For some, that hit was devastating. And while significant progress has been made toward stabilizing the world’s economies, we still haven’t achieved pre-recession levels of confidence.

Add to that already high anxiety level the concerns about the potential for a new Euro recession that have been percolating since late last year, and some people are probably giving serious thought to hiding whatever valuables they can away in a mattress. While that might well be an understandable reaction to troublesome times, educating yourself about the different financial tools that are available, and understanding their strengths, weaknesses, and pitfalls makes more sense. By familiarizing yourself with all the plusses and minuses, you will be able to make productive use of the tools, and bolster your financial security with a minimum of risks.

Perhaps one of the greatest challenges to learning the good and the less-than-good about financial tools is that the vast majority of information available is provided by organizations that have a vested interest in the very financial products they describe, which naturally gives them incentive to promote the positives and downplay the negatives in the products and services they offer.

Some fairly significant changes in the regulation of the banking industry became effective in 2013, with the abolition of the government’s Financial Services Authority (FSA) for its failure to avert the lending crisis that contributed to the recession of 2008, and the placing of the entire banking industry under the direct supervision of the Bank of England’s Financial Policy committee (FPC). This shift will hopefully increase transparency and accountability in the banking industry, for both Parliament and the general public.

Of course, there will always be some financial institutions that manage to skirt the laws and avoid regulatory scrutiny while continuing to engage in predatory practices in lending, particularly regarding high-value items, such as home mortgages and automobile loans. It is unreasonable to expect government regulators to completely eliminate such predatory businesses before they do damage to customers, and it falls to the consumer / lender to educate themselves as to what constitutes good lending practices. Thankfully, there are organizations whose sole function is to help consumers spot such predatory practices, one example being the Center For Responsible Lending, a U.S. organization. While the Center is not geared specifically to the UK, it does offer a substantial amount of information that can help one avoid being caught in a predator’s traps.

Another particularly valuable resource can be found on the Readies website, which discusses the strengths and weaknesses of various financial tools specific to the UK. By evaluating various types of lending vehicles and comparing competing financial institutions, the site can help consumers avoid predatory lenders.

It is to be hoped that consumers have grown wiser in the wake of the financial devastation that occurred during the decade just past. Indeed, it is essential that we each become more thoroughly educated, so that we can more effectively spot – and avoid – such hardships in the future… even if our government cannot.

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