A downturn in the economy isn’t always bad news; there are the obvious negatives such a job losses, less easy access to credit and that uneasy feeling of general insecurity. But a lot of people are using all those as a catalyst to better themselves financially. Some statistics have recently been released by FDS Social Research that a newfound financial learner like me finds comforting and interesting and worrying, all at the same time.

34% of households are paying off debt or reducing mortgages – Over a third of the country are making concerted efforts to reduce what they owe. I’m a proud member of this statistic! This will have short-term consequences to their perceived standard of living, but the long-term benefits will be well worth the effort. Interest rates are currently at an historical low, with many ‘height of the boom’ 2 year fixed rate deals coming to an end if they haven’t already, resulting in dropping onto a providers Standard Variable Rate which tracks a few points above the Bank of England base rate. For those in this fortunate position, they would find their monthly repayments dropping by hundreds of pounds. Use this time effectively to be paying off masses amounts of the principle sum borrowed without any extra effort.This is further backed by news yesterday that mortgage repayments are outstripping new lending by £418 million and that personal debt has dipped for the first time since records began in 1993.

What are the other two-thirds doing? I will assume half of the remainder do not have debt or a mortgage, which leaves 33% of the country still spending more than they earn and doing nothing about it.

28% have stopped using credit cards altogether – This depends ultimately on the context, and sadly, FDS didn’t elaborate further. We could conclude that 28% of households, having paid off their balances, have returned to the old-style way of saving for what they want instead of returning to the ‘buy now, pay (much more for it) later’ culture of the last decade. Alternatively we could conclude 28% of households have simply maxed out their cards, can’t get new ones, pay the minimum balances and so have been stopped from using credit cards altogether. I suspect the truth is somewhere between the two.

There are negatives to this though if they have stopped using credit cards out of their own choice: MBNA currently have some good reward card offers, and both Egg and American Express have good cashback cards for those who know they’ll be spending more than £4,000 a year on plastic. The important thing though is to ensure the balance is always paid in full every single month, otherwise the interest charged will dwarf any cashback deal.

23% of households who don’t currently save plan to start within the next 12 months – This is a pretty good statistic from my point of view. Everyone should be saving something out of their take-home, even if it is just a few pounds. The very first step to getting out of debt is spending less than you earn, paying off your highest interest borrowing first (I was shocked to see someone paying 53.95% on a credit card yesterday!), and then keeping going until you are debt free. At that point, you can begin saving in earnest. This statistic could therefore be viewed that 23% of all households in the UK who are currently in debt, with good planning and willpower on their part, will be out of debt inside the next year. I’m included in this statistic.

34% of households are saving more than they did a year ago – Perhaps even though you may be in debt, you had it drummed into you as a child to ‘always put a little by for a rainy day’. It’s good to know that again, over a third of all households in the country will be putting a little more by each month than they did last year.

Of course there are economic knock-on effects to this. Money saved is money not spent. When the economy is generally in good shape, that’s a good thing. Interest rates are stable and worthwhile and other peoples’ spending keeps things ticking along. When there is a downturn, sometimes the only way to get the fires stoked is to spend. If more families are saving, then the recession could be prolonged.

Despite the different ways these statistics can be interpreted, in general I believe they’re a good thing. It shows our country is waking up and smelling the coffee. I just hope that when things begin to improve, access to credit eases and people start getting raises or find employment again, that as a nation we don’t gravitate back towards our old ways.

Are you a statistic? Share your views in the comments!

Up to the point that my life began to change for the worse, I had never considered the worth of debt. Sure, like everyone else I’d felt the consequences of debt: less disposable income; having to work harder just to stay stationary; and the niggling feeling of not quite owning whatever I was supposed to actually be enjoying. But did I ever stop to consider whether debt was worth all that?

Of course not. Debt is just the way our society works. We want things now, and we have them now. Does it matter if we might still be paying premium, hard-earned pounds for them long after they’ve depreciated to the point of being worth a fraction of their purchase price (in the case of cars, for example)? Does it matter that the high spec laptop you got on a 4 year finance deal 3 and half years ago is now just decidedly average, but you are unable to afford to upgrade it because you’re still paying premium for the old one? Does it matter that those home improvements you put on the credit card a year ago with the intention of paying it off in a month or so are still around, costing you hundreds in interest payments? Are you enjoying those improvements, or are they feeling like an elephant tied round your neck?

By and large, I’ve come to the conclusion that yes it matters, and no, debt isn’t worth it.

You can have all these things without the debt negatives by putting the cash you’d pay the finance company in your own savings account. Overpay yourself, make micropayments, work a little extra overtime here and there. If you want it enough, then pay with your own cold hard cash and not somebody elses. That new laptop or car is yours. You own it, and you won’t be making payments on it for the next year or some multiple thereof.

Of course, this isn’t always possible, but by and large it should be your first option before reaching for the credit monster.

Sounds a little preachy doesn’t it? But it makes sense. It also makes you double-check yourself. Buying things on credit is easy, and deliberately so. It’s just £50 a month here, £125 there. But these regular increased outgoings month in, month out, quickly make you poor. When you come to part with your own money though, take that 10-second pause and consider “do I really want this?” or could you make do with something a little cheaper? Do you need it at all, or is it a pure want? If after that 10 second introspection you still want to do it – go ahead. You need it, you earned it, you get it.

There are scenarios where debt can be worth it. Few people can afford to buy a house right out. Sure, a mortgage costs you a fortune over the term, but you get your home out of it. Outside of this realm, I still struggle to convince myself that debt is worth the price it requires anymore.

And I don’t just mean monetary.