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Spend & Save

Simon Read: It’s time to cut up the tempting Christmas cards

Credit isn’t free money and you will need to pay it back later

There seem to be an increasing number of calls for all of us to take responsibility for our own financial future.

The Government wants us to boost our own retirement saving, and is going to make many do so for the first time by forcing firms to set up pension schemes for employees through the ongoing auto-enrolment programme.

The financial services industry is warning that the new rules governing financial advice could leave millions out in the cold with no advisers on hand to help with their nest eggs. But this all assumes most of us have so much cash available that we need to make financial decisions about whether to invest in stock-market growth now or stash money away for years to come to help pay for a happy retirement.

Sadly, it’s the opposite for millions. Instead of being in the envious position of being able to choose about what to do with our finances, many are being forced to choose between what essentials to spend money on.

That’s highlighted by shocking research published today by CallCredit, which reveals that one-in-three workers is unable to save anything from their monthly salary. Many millions need to use their entire take-home pay to keep up with the rising cost of living and repayments on financial commitments such as mortgages, credit cards, overdrafts and unsecured loans.

If people can’t afford to save for the future – or, more crucially, build up a rainy-day sum for emergencies – then a sudden  major expense such as a broken-down car or blown-up boiler could push them into serious debt.

It’s no wonder that profits at payday loan firms are booming as their offers of easy money are clearly tempting for those living on a financial knife edge.

Indeed, research published yesterday by the Co-operative Group’s online electrical business shows that one-in-four workers struggling to live within his or her means resorts to payday lenders when buying essential household appliances. Further, one-third said that they would run into debt this Christmas in order to pay for festive purchases. That can lead to a rocky road where soaring interest charges mean people can never afford to clear an ever-growing debt. So I would like to echo this week’s call from the debt charity Credit Action for people to be careful about being caught in the credit-card trap  this Christmas.

Michelle Highman, of Credit Action ,said: “Credit cards can encourage us to think that we’re not spending real money. Even the most money-conscious splash out at Christmas. But credit isn’t free money, and you will need to pay it back later.”

I’d go further: cut up the plastic and go without rather than risk a debt hangover in the new year.