Glimmers of optimism appear among financial gloom


With Christmas debt looming and warnings of a triple-dip recession in the headlines, you might think consumers are feeling pessimistic about their finances. But recent research is showing a flicker of financial optimism and an increased willingness to spend.

Brits feeling less guilty about money
According to a January 2013 survey by First Direct, 60% of UK consumers had no regrets with the way they distributed their cash in 2012, representing an 8% increase on the previous year. That happiness appears to be regional, however. The happiest spenders were in the North East, where almost 60% claimed to have no regrets. In London, just 35% said they had no spending regrets. financial-optimism

Among those who did have regrets, 32% said their main regret in the past 12 months was not saving enough, while 23% said they felt guilty about not paying off more debt. Still, these regrets are less prevalent than they were in 2011, when 52% regretted not saving enough and 33% regretted not paying off more debt.

"Against a backdrop of inflation running higher than average wage increases, it's great to hear that people are positive about their finances and have fewer financial regrets," said Andy Forbes, head of product at First Direct, in a statement. "It seems that they are focussing on reducing their debt and increasing their savings."

Spending gets more fun
Meanwhile, according to the latest Deloitte Consumer Tracker (released January 2013), increased positivity may be leading to increased spending in optional categories -- "extras" that aren't living expenses. The number of people who said they felt more positive about their economic situation increased by 6% during 2012, and Brits were also 9% less likely to rein in their spending on going to the cinema, theatre or concerts in the final quarter of 2012 compared with the same period in 2011. Retail therapy also appears to be back on the radar, as people were 14% less likely to cut back on clothes shopping.

Much of this can be attributed to the fact that unemployment appears to be on the decline, with a record 30 million adults in jobs during September, October and November 2012. This was part of a rise of half a million employed people on the previous year, bringing the country's employment rate to 71.4%

Don't get carried away
Despite an increase in general positivity and confidence, the reality remains that disposable income is not rising at the pace that Brits' spending habits would suggest. In fact, the Deloitte report found that 45% of consumers actually had less money to burn in the past three months, while only 12% had more.

With this in mind, consumers need to be mindful of how much they are spending on leisure activities and luxury items -- and make their spending work for them. A credit card that offers cash-back rewards on purchases, for example, might allow you to spend on necessities (like food and housing) and then use the rewards for reasonable splurges.

Transferring an outstanding balance to a new card that offers 0% on balance transfers and a low introductory APR could also help you spend your way through the recession without building up too much debt.

See related: Your post-bankruptcy game plan, Are you suffering from 'banxiety'?

Published: 6 February 2013