HNW Magazine explores profit and wealth strategies for high net worth individuals, entrepreneurs and business angel investors.

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By smith (not Smith)

It’s been said that the middle class live above their means in order to be comfortable, and the wealthy live below their means so as to be perceived as middle class, and avoid being mugged.

Or something like that…

Now while that’s an obvious rank and file overgeneralisation, like most black-and-white statements it holds a few grains of truth.

Prudence is certainly a virtue in the game of wealth, and the classes who still worry about the phone bill at the end of the month have, at least in Britain, managed to again launch themselves down the slippery slope of credit card (plastic) debt, post-recession.

According to PricewaterhouseCoopers’ (PWC) Precious Plastic: How Britons Fell Back in Love With Borrowing report, the average UK household will owe circa £10,000 in debts such as personal loans, credit cards and overdrafts by the end 2016 – a new high in cash terms.

Borrowings grew to £239 billion in 2014, up by £20 billion, marking the fastest rate of non-mortgage debt growth in a decade.

The PwC report estimates continuing rises in non-mortgage household debt of 4% and 6% over the next two years, respectively, blaming record low interest rates (cheap money) and the gradual easing of rules on access to credit. And consumer sentiment shows the level of debt worry about making future repayments has fallen off since 2013 from 26% down to 18% in 2014.

Additionally, personal debts levels show people in the UK owed £1.436 trillion at the end of May 2015, up from £1,407 trillion 12 months prior – the equivalent of an extra £584 per adult.

Teasing at the top of your credit card(s) limits is one of those things that smart people don’t do. In fact, it’s one of the first things they endeavour to get rid of based on the often exorbitant interest charges attached; second only to those hire-purchase rates attached to the new suite you impulse-bought from Sofas-R-Us, and short-term Wonga loans.

Want to play like the smart people do?

Buy a pair of scissors and aim them at your plastic.

 

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