Personal Debt and Financial Planning in the UK

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Questions and Answers

What economic condition contributed to personal debt becoming manageable in the UK until 2008?

High property values

Growing economy and low unemployment (correct)

High interest rates

Low inflation rates

What was the peak unemployment figure in the UK reached in November 2011?

3.5 million

2.7 million (correct)

2.12 million

1.62 million

Which consequence has resulted from many individuals not planning to manage their debt repayments during unemployment?

Growth in personal savings

Decrease in mortgage approvals

Increase in repossessions and bankruptcies (correct)

Reduction in consumer spending

What was the number of people who became insolvent in England and Wales in 2010?

135,045 (A) Signup and view all the answers

Which year saw the number of repossessed properties peak at nearly 49,000?

2009 (C) Signup and view all the answers

What was one contributing factor that prevented more rises in repossessions after 2009?

Historically low interest rates (C) Signup and view all the answers

From which year did the rapid increase in individual insolvency cases begin, particularly related to household debt levels?

2004 (C) Signup and view all the answers

How many unemployed UK workers were there in January 2008?

1.62 million (A) Signup and view all the answers

What is a common mistake people make when planning their finances?

Assuming all expenses will remain constant. (B) Signup and view all the answers

Why is it important to keep a detailed spending diary?

To accurately assess total spending over time. (B) Signup and view all the answers

What can lead to significant financial problems according to the content?

Planning a holiday without a budget. (D) Signup and view all the answers

What does Laurel struggle with regarding her savings?

She has no surplus cash to save. (C) Signup and view all the answers

What is a suggested method for understanding spending habits?

Keeping a daily spending diary. (D) Signup and view all the answers

What psychological bias do people often exhibit when estimating their finances?

Optimism bias leading to unrealistic forecasts. (C) Signup and view all the answers

How can larger purchases affect personal finances?

They may cause unexpected financial strain. (C) Signup and view all the answers

What is a potential benefit of realistic financial planning?

Better management of regular expenses. (C) Signup and view all the answers

What is a key strategy for investors as they approach retirement?

Moving funds to safer savings options (A) Signup and view all the answers

What duration is generally suggested for keeping money invested to benefit from long-term growth?

At least ten years (C) Signup and view all the answers

Which of the following is NOT a key consideration for maintaining personal financial sustainability?

Avoiding all financial products (C) Signup and view all the answers

What approach should investors take for effective long-term financial planning?

Diversify into suitable financial products and services (B) Signup and view all the answers

Which topic is important to consider alongside maintaining sustainable personal finances?

Setting financial priorities (A) Signup and view all the answers

What is the total amount of money Kevin plans to allocate towards buying a two-bedroom flat?

£180,000 (C) Signup and view all the answers

How much money does Karishma have in savings that she used as a deposit for her house?

£25,000 (B) Signup and view all the answers

What type of insurance did Karishma take out to protect herself against loss of income?

Mortgage payment protection insurance (MPPI) (B) Signup and view all the answers

What was the waiting period for Karishma’s mortgage payment protection insurance before she started receiving payments?

60 days (B) Signup and view all the answers

What amount of Kevin's inheritance is allocated for luxury vacation spending?

£5,000 (C) Signup and view all the answers

What is the total amount that Kevin and his partner will put into an emergency fund?

£5,000 (D) Signup and view all the answers

What is the total debt amount Kevin plans to pay off with part of his inheritance?

£10,000 (A) Signup and view all the answers

How much money does Kevin intend to invest for a period of between five and ten years?

£35,000 (D) Signup and view all the answers

What is the main focus of the FCA's confirmation regarding payday lenders?

Implementing price cap rules for payday lenders (A) Signup and view all the answers

Which of the following reflects the state of individual insolvencies in England and Wales for July to September 2014?

Statistics showed a significant increase in insolvencies (B) Signup and view all the answers

What overarching theme is suggested by StepChange Debt Charity regarding the regulation of the payday loan market?

Regulation has not sufficiently addressed problems in the payday loan market (A) Signup and view all the answers

What type of information can be found in the 'Live tables on repossession activity' from the UK Government?

Data on mortgage arrears and repossession figures (B) Signup and view all the answers

What is the focus of the Money Charity's publication titled 'The Money Statistics November 2021'?

Updating statistics on various aspects of personal finance (B) Signup and view all the answers

Study Notes

Personal Debt in the UK

Personal debt in the UK has increased and passed £1,600bn.
This increase followed a period of minimal debt growth due to the financial crisis of 2008.
The level of personal debt is manageable as long as the economy is growing and unemployment is low.
Following the financial crisis, unemployment in the UK increased significantly from 1.62m in January 2008 to 2.7m in November 2011.

### Insolvency and Repossessions

The number of people becoming insolvent in England and Wales increased from 35,604 in 2003 to 135,045 in 2010.
The number of properties repossessed each year increased from 8,000 in 2004 to nearly 49,000 in 2009.
Low interest rates following the Bank of England’s rate cut in 2009 helped to prevent further rises in repossessions.

Financial Planning and Sustainability

Financial planning should aim for a balance between optimism and pessimism about the future.
Planning should account for potential job loss, changes in income tax rates, and unexpected expenses.
Creating and maintaining a daily spending diary for a few weeks can help to identify overspending on small purchases, such as snacks and takeaways.
Realistic financial planning involves setting priorities, planning for contingencies, and using appropriate financial products and services.
Asset prices fluctuate significantly, so long-term investments should be made with a horizon of at least ten years to benefit from long-term growth.
Moving money out of high-risk investments into safer savings accounts or fixed-term bonds may be necessary as retirement approaches.

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Description

This quiz explores personal debt trends in the UK, examining how it has evolved since the 2008 financial crisis. It also covers the impact of insolvency and repossessions, alongside the importance of financial planning for sustainability in uncertain economic times.