The Credit Crisis Survival Guide

An excellent article with sensible advice.
Well done TMF.

I just hope that when growth does return, things are going to be better regulated so that we cannot again have the fat cat culture defrauding society. I want to see really strong legislation over banks, a return to mutuality for house lending and strict limits on bonuses. There are people in all walks of life who work bloody hard for their living, from the shop floor to the boardroom. Most of them don't get paid millions of pounds for doing a damn good job. Why should a bank exec get paid millions just because the firm he works for handles a lot of money? You may say he deserves it because he brought a lot of business through the door but that doesn't alter the fact that ultimately, that bonus is still paid for by the rest of society in the form of lower salaries and higher prices. Nobody is worth tens or hundreds of millions of pounds, no matter what they achieve and nobody needs that much to enjoy a wonderful life.

Have things changed that much? I noticed this news item in my almanac seven years ago today.


The former Chief Executive of Marconi, Lord Simpson was criticised as he left Marconi with a payout of £2.8m. Marconi suffered one of the most dramatic collapses in history having gone from a market capitalisation of £34.5bn at its peak to a value then of £45.3m

I dont think this is over by any means but there is a lot of pessism, panic and fear around. Now is a great time to open a SIPP and start chucking money in an ftse100 tracker on the first of every month. You are either going to double your money in 5 years at least or we are in aramgeddon!

However I would not buy individual stocks right now. It is a dangerous game catching a falling knife at any time. We are in a bear market where there is still no sign of banks lending. This will happen then the recession will start. personally i think this is a good thing as we need to clear out all the dead wood ie debt and start talking about interesting things again rather than house prices, interest free credit cards and 3 holidays a year. Lets start living everybody.....

If we are really and truly going to purge the system of debt, the pain to ordinary people is going to be by an order of magnitude worse than previous "recessions" and "credit squeezes". So far hardly any have so much has been breathed on by real hardship. Not many repos, bankruptcies and redundancies yet, just warnings. But they're coming!

If, OTOH, as currently looks likely politicians are yet again going to engineer the price of money down-- so that the West can go on living on tick supplied by Asians and Russians a while longer-- the agony will be deferred a short time and be worse than ever when it overwhelms us.

We are still, unbelievably, reading about how Brits are thinking of investing in foreign holiday property; and we can see how savings rates are being slashed at the first opportunity furnished by the Bank of England's "wise men", while mortgage lenders make haste to cut the cost of borrowing and store cards still get whacked out to the young, naive and financially unwashed at 20-30% interest rates.

I see little or no evidence of a fundamental revulsion from the debt-ridden, consumerist way of living that distinguishes us westerners from self-sacrificing, industrious, educated and nationally disciplined rivals from Islamabad to Hawaii.

The UK has public sector unions, featherbedded with non-jobs for life and indexed pensions, clamouring for pay rises. One in five of the workforce insulated from the horrors the rest of us are beginning to sniff. A recipe for civil war?

We have savers, Fools among them, expecting that every penny they chased in abnormally high interest in every foreign bank should be salvaged 100% by the taxpayer.

We are still living in the fool's paradise of credit, and how much deflationary medicine will the government force down our throats with a general election to fight in 12-24 months?

Prepare for a grimmer reckoning a little later.

Luniversal,
spot on and add to that 100/125% mortgages and everything comes back to the Government.
no bank regulations,no control over local authorities investing tax payers money,no control over city bonuses/malpractices,no control over public spending be that non jobs,index linked pensions,return on investments etc etc.

We haven't seen anything yet. Wait until the 10p tax rises and unemployment gathers momentum next year. Better, yet wait until Mr Putin starts complaining that the loan he made to Iceland is being compromised by Brown's use of the Terrorism Act to sequester Icelandic assets. Russia is not re-arming for nothing and with our energy generation capacity dire because of Brown's 11 years of pandering to the anti-nuclear power luddites we are in for a pretty torrid time. Still there is always France to bail us out at a price!

Turning to fascism RedVeg993? We are already there by stealth courtesy of Brown and his cronies. Wasn't it Mussolini who set the targets for train times and shot the drivers who failed? It looks like the Brown model to me without the gun fire just an asbo!

Still, I am enjoying the Autumn air and find a morning run is still invigorating!

AdAstra

Hurrah! Chins up, jolly good sensible advice. Just like the chairman of Kaupthing said the other day, no need to worry, international bank, lots of liquidity, don't panic.

I shall be investing in a couple of cases of shells for the 12 bore, there'll still be plenty of rabbits & pigeons out there.

But no, it couldn't get that bad, could it. I'm sure if we all think happy thoughts everything will turn out alright & no need make plans in case it isn't.

"just think of some of the ways you can stop spending money…that daily coffee at Starbucks, buying lunch every day, walk or ride to school, work and the shops rather than driving, one less night out a week etc.

Consider cancelling or deferring discretionary spend on things like a holiday abroad, the French annual skiing trip or big ticket items, like a new car, plasma TV and a new kitchen."

Savings, what a joke! I wish I could afford a coffee out, a drive to the shops, any night out, any meals out even take-away food, I go for very very occasional days out, car is over ten years old and as for replacing anything with new in the house I might as well dream on!!!!

I don't know how to meet this months bills, never mind next months.....

The REAL world, for most of us millions of ordinary people......

Been there chaz25. It was no fun trying to bring up a family when mortgage interest rates were 16% and inflation was up there as well. It was under a Labour Chancellor, Callaghan, as well. He said he was going to make the Middle Class pips squeek. We didn't realise he meant any poor working class sod who dared take out a mortgage to buy his own home.
I wouldn't trust any politician to look after anyone but themselves. They are all the same. Thatcher and Reagan created the conditions that allowed this to happen and every Chancellor, Prime Minister and President since, including Brown, has done nothing to prevent it.
What they are trying to do now is too little too late and it won't work. They are simply pouring our money into a black hole that will swallow it all up with nothing to show for it except that the big crash will be even worse when it happens.
So batten down the hatches and prepare for the worst. We are in for a really rough ride.

Re Point number two: you've only lost money in real terms on the stock market if you have SOLD at a low price during the panic. I thought the number one rule about investing in stocks and shares was that it is a LONG TERM investment.If you don't need to sell, just sit tight!

Some interesting points, however I see a lot of blame laid at the feet of bankers. What was Brown, FSA and BoE doing between 2000 and 2007 to curb excessive borrowing? My point being we as a society, borrowed beyond our means, banks (mainly former building societies) lent recklessly, BoE held interests rate down for too long ie 3.5% and the Government sat back and watched. Being more worried about how they could get their next political project funded by stealth taxes. Quite frankly they were not taking stock of the situation but rolling in the glory of it. Now I see various MPs rolled out for various audience participation programmes, slagging off bankers who are not present to defend themselves. I guess that is wnat politicains do very well - blame others.

Rant over :)

Since when did Alan greenspan have anything to do with compelling anyone here in the UK to over-borrow? Take responsibility for your actions!

Nothing left to invest!! Lost all money for kids education (yes, lucky to have had it in the first place), all money for retirement EVERYTHING GONE!! Difficult to see that we will ever be able to make anything back. Bet lottery making loads more money lately. That is what my extra £1 a week is going on... the odds don not seem to bad in this climate!!

Hi there. I'm new and this probably isn't the right place to ask this question. But I heard that 'Fool' has a page that advises which shares are a good buy.Can someone point me in the right direction on this site please.

(I always, financially, do the opposite of what everyone else does, and the opposite of what financial advisers 'advise'. So far, fingers crossed, it's stood us in good stead.)

Thanks for that Max.

Ive never needed an overdraft and have no mortgage. I do have debt. Im never late with payments and I have a good, secure job in the oil industry - just signed up with a job for 5 years (+) which I figure will see me through recession. Yes Im refused a credit card? All I wanted was a 0% credit card, not to borrow more but to transfer debt into it to speed up repayment. I'm actually, then, pretty safe bet but just by dint of HAVING debt, I'm having my buying power diminished by the current climte!

Ive been offered to join my employer's sharesave scheme which Im going to sign up for tomorrow. Seems its a good idea - anyone advise me here?

One of the early astronauts - Wally Schirra - had a useful phrase that often comes back to me at difficult times: Maintain an even strain. That is, don't pull too hard (in any direction)and don't let go, either (to desperate measures).

As for finding reasons to be cheerful, in the last few weeks the amount of spam in my Inbox has dropped by about 50 percent. Anyone else noticed something like this? Explanations?

I drive and oldish car that is reliable and I owe no money on, which is good because it is not worth a lot. It is a 1.6 Rover 200 Cabriolet, Insurance Group 12, 34 Miles to the gallon £188 per year road fund Tax and I do 15000 miles a year. I have seen many new cars on the market at the moment which have a lot lower running costs like a 1.6TDCI Fiesta that would save me £140 per Month on running costs due to the lower insurance group, 67mpg and £35 Road tax + no MOT's new tyres or other possible surprise costs. Now I have worked I can use some of my savings and borrow the rest to buy a new car and still be better of each month due to the repayments being less than £140 per month, rather than throwing the money away in Basically Tax. It goes against the grain to borrow money for a Car and certainly goes against the general gist of this article but I seem to have found a situation where borrowing money will save me money ...any thoughts?

Strebor19
We're in a similar position. Have you thought about not buying a new car - they depreciate quickly during the first 1-3 years? I'd also have a look at Which Car to check out the mpg figures and reliability - some manufacturers' stats seem inflated and may not be a good basis on which to make a choice. We tend to keep our cars until they're 10+ years old, so the info on reliability is helpful. We think that by buying a nearly-new car we will end up saving money on running costs; we're going to use our car fund and borrow from ourselves to do this (bye bye new bathroom!) and use any leftover monthly cash to pay ourselves back over the next year. Other TMF discussion boards also provide info on negotiating with dealers on price and finance etc.

On the subject of the credit crunch/recession, I'm making more sure than ever to live within our means, and not to touch our savings buffer, just in case. I don't see what else I personally can do, so thank you TMF for the above article! My instinct would be (if I had any extra cash!) to buy incrementally into trackers particularly in the next 6-12 months and then re-evaluate.

We live in interesting times; yesterday I found myself trying to explain to my kids (4 and 6), in I hope a calm way, that when they grow up people will talk about the upheaval of this year and it'll be strange to them not to remember. Blank looks, of course! I wonder what it'll all look like in 10/20 years' time?