Annual budget in democracies involves every circle of life and with financial crunch spreading is wings all eyes are set on the budget to be presented in House of Commons for fiscal year 2009. The hype and discussions, before and after the budget seem endless. With recession in progress, credits markets not working properly and unemployment on rise the masses awaits budget with enthusiasm and hope. Everyone wants it to be a “People’s Budget”.

Chancellor of the Exchequer Alistair Darling is expected to present the budget that would account for the difficult situation and suggest policy measures to overcome the major challenges being faced by the ailing UK economy. The Labour Government of British Prime Minister Gordon Brown is constantly under heavy criticism and this can be their shining moment. They can get back the support or lose it forever. Let’s keep our fingers crossed as we eagerly await the budget.

Warren Buffet has carved a niche for himself in the world of finance. Those who follow financial news look up to him as a role model, heed his words of wisdom and take guidelines from them. The 78(about to turn 79 in August) year old Warren Buffet is world’s second richest man only to be topped by none other than Bill Gates. He is the world’s most successful investor and being a philanthropist donates generously to charities.

What makes Warren Buffet so different from other business men? May be it’s about starting early in his life, becoming filthy rich yet always displaying his down to earth demeanor or being considered as one of the greatest financial genius of our time. He bought his first farm at the precocious age of 14 with savings from delivering newspapers. Now his company, Berkshire Hathaway, owns 63 companies. “The Oracle of Omaha” resides in the same 3 bedroom house that he bought 50 years ago. His simple life is free of socialization with the high society crowd. His favorite past time is to enjoy pop corn while watching Television. And what’s more the man who is considered among world’s most influential people does not carry a cell phone, nor has a computer on his desk.

There are at least 47 books written on Warren Buffett, the only other living persons named in as many book titles were U.S. presidents, major world political figures, and the Dalai Lama. Here are a few of his inspiring words:

“Stay away from credit cards (bank loans) and invest in yourself and Remember:

1. Money doesn’t create man but it is the man who created money.
2. Live your life as simple as you are.
3. Don’t do what others say, just listen to them, but do what you feel good.
4. Don’t go on brand name; just wear those things in which you feel comfortable.
5. Don’t waste your money on unnecessary things; just spend on them who really in need rather.
6. After all it’s your life then why give chance to others to rule our life.”

Really is there a thing as credit card addiction? I do use credit cards a lot but I can’t be a credit card addict! I can’t resist using credit cards but that doesn’t make me an addict? Err or does it?

This is a mere reflection of denial towards a major addiction that we keep on ignoring and is getting the spot light thanks to the current global financial crisis. Credit card addiction can be defined as uncontrollable compulsive use of plastic money despite already facing its disastrous consequences. The addiction takes its toll to the extent that paying bills and spending more becomes the focal point of an addict’s life.

Credit card addiction is not directly related to the amount of debt you have rather your inability to control the craving to overspend. Here are some of the obvious symptoms of Credit card addiction:

1. Life dictated by credit card bills.
2. Doing your job not for the love of it but to pay the bills.
3. Constantly looking for ways to get hold of more credit cards.
4. Borrowing money to pay debts and then over spending again.
5. Avoiding credit card bills
6. After paying minimum monthly payment, go on a shopping spree
7. Money problems straining your relationships

 If these symptoms sound familiar then please snap out of this denial mode. Mend your ways for yourself and for those who love and care about you.

Watch out this space for more on credit card addiction and how to cure it.

Not so long ago when I was young erm well I still am young at heart though, (I wonder where is that modest smiley) so any way, I remember on every 1^st of April we used to sing this song to every victim of April fool’s day.

“April Fool

Go to school

Tell your teacher

That you are a fool”

Today for some reason I feel like saying this to all those who are caught in the vicious circle of indebtedness. And why not? Who considers it wise to lavishly spend debt money and afterwards pay interest on the huge debt that keeps on increasing rapidly?

I am sorry, but the hard truth is that only fools act thoughtlessly and yup that’s the way we have acted so far.  May be that is the reason why Mark Twain has rightly said:

“The first of April is the day we remember what we are the other 364 days of the year.”

This year I think there should be a new version of April’s fool song. Check this one out:

But money without sweat
Was thanks to the debt
And soon became a threat

So poor April fool
Had to go back to school
To tell his teacher
That he still is a fool

So yes, this year we really need to celebrate April fool’s day!

With Unemployment passing the landmark of 2 million, UK appears to be feeling the full brunt of global economic slowdown. The job market volatility is creating insecurity and tensions even amongst those who are lucky enough to be employed at times like these. No doubt that the economic downturn has gripped not only UK but the entire world, but we also cannot ignore the fact that unemployment in UK is rising at twice the rate than rest of Europe.

Unemployment is a terrible, terrible thing. From an employed person you become a claimant within a day. You have to daily build up your confidence and your enthusiasm for job hunting. Even with bills piling up and jobs becoming as rare as hen’s teeth you have to rekindle your hopes every day. Money is obviously the driving force but work is more than just a paycheck.  It is about having a reason to get up in the morning, to have a proper routine, to meet your colleagues and feel a certain sense of responsibility.  In simple words it’s about having self-respect and a reason to move ahead. No matter how much we complain about our work, in our hearts we all know that “Empty mind is Devil’s workshop”.

The British Government needs to take serious steps to eradicate the unemployment that has seen the biggest increase since 1971. Vacancies are at record low and the reports by the British Chambers of Commerce (BCC) and CBI have both predicted that UK unemployment will rise above three million in 2010. The major challenge is to help people back to work as quickly as possible and make sure that their unemployment is short term rather than long term.

Over 50 police officers arrested 8 men and a woman who are suspected to be involved in over £40 million mortgage fraud in South of England. Remember behind every mortgage fraud there has to be a team of professional fraudsters who work in a ring to make their schemes look official and legitimate.

So how should you avoid becoming a victim of mortgage fraud? Here are a few tips:

Educate Yourself: Read and reread all the documentations thoroughly. If you don’t understand anything then ask questions. You can even consult your attorney before signing any agreement or documentation. Make sure to keep copies of documents with you.

Know your Boundaries: Most of the mortgage frauds are successful because the fraudsters offer a price that is well above the fair market values. Many people in their haste and in fear of losing such tempting offers end up as mortgage fraud victims.

Get References: It is important to get references and make sure to check them. Do not judge the mortgage lenders from the way they look or how convincingly they talk. The fraudsters are mostly middle aged folks with innocent looks and know how to tempt people. Remember the 9 people that were arrested recently, they all are aged between 29 and 73.

Do not Rush Things: Remember that hurry brings worry. The fraudsters might be interested in rushing things up but you should keep your calm. Mortgaging your house is an important decision of your life. Take time and all necessary precautions before making any deal.

But to begin with let’s look at the difference between Depression and Recession. The economists have yet to agree upon what differentiates depression from a recession. But the generally accepted definitions are

Recession: National Bureau of Economic Research defines a recession as “the time when business activity has reached its peak and starts to fall until the time when business activity bottoms out“. Some economists also believe that two consecutive quarters of falling GDP (Gross Domestic Product) also suggests a recession.

Depression: A prolonged recession in economic activity is labeled as depression. Characteristics of an economic depression include decline in business activities, lack of credit, falling prices, rising unemployment, numerous bankruptcies and currency fluctuations among others.

Let’s look at the graph of GDP growth as is released by Office for National Statistics.

In the last quarter of 2008, GDP fell by 1.5% from the previous quarter. It is 1.9% lower than the fourth quarter of 2007. It is far higher than anyone expected and no doubt we saw Gordon Brown Govt. slashing interest rates five times in 4 months and another announcement is expected soon.

Unemployment is nearing 2 million. Overall services sector and industrial production has suffered sharp decline in the last quarter of 2008. Construction output has also tumbled to 1.1%. Household expenditure fell 0.7% which means that people have tightened their belts on the face of recession and are spending far less.

These figures speak for themselves and it seems that the current financial turmoil or recession is heading rapidly towards depression and what remains to be seen is that how long and how deep this economic downturn will be.

House prices in UK have fallen sharply. An average house in England and Wales was about £184,753 only a year back and now its price has fallen almost 15.1%, which means that home owners will be getting a whole lot less (£28,000 to be exact) than they hoped for.

Remember not long ago the same housing sector enjoyed for 21 straight months, an increase in the average annual rate of change from December 2005 to August 2007. In contrast it is the 17^th consecutive month that the annual rate of change in housing sector has hit a fresh low. The current market trend is a clear indication of flattening of housing sector.

The Royal Institution of Chartered Surveyors, in its survey has reported a sharp decline in construction workload for the final three months of last year. Apart from public non-housing sector where workload remained stable, all other sectors experienced a decline. So, now there are homes which people are willing to buy but cannot buy thanks to the financial crisis that has enveloped the entire world including UK.

UK housing market is going through a sharp adjustment. On one hand house prices have fallen and house builders are facing difficult trading conditions and on the other hand people are finding it extremely difficult to get mortgages. Unemployment and job insecurity is another major factor that is making it difficult for people to obtain home mortgage loans.

It is yet to be seen how Government rescue plans will uplift the ailing housing market.

Online Bank frauds are on an upswing. Customers of various banks are exposed to risk of fraud and can lose their life’s savings, if not careful.

Apacs in their press releases have shown that online bank fraud is becoming more and more common. Recently Lloyds and Halifax customers have been warned of fraud threats. Because of the merger of the banks there is a good chance that “phishing” scams will proliferate.

Phishing scam involves sending legitimate looking, fraudulent emails to gather personal and financial information and use it for identity theft schemes. The emails contain a link which takes the customer to the fake website where they are asked to enter their personal details. The reasons given can be anything from account update or validate to verify it.

Lloyds Banking Group, the new owner of Lloyds, Halifax and Bank of Scotland has asked customers to ignore fraudulent emails.  Rob Devey of Lloyds recently said:

“Fraudsters are opportunists who are always on the hunt for new ways to dupe customers. It should come as no surprise that the creation of Lloyds Banking Group may trigger another spate of phishing attacks. Brands under the Lloyds Banking Group banner such as Lloyds TSB, Halifax and Bank of Scotland never send emails asking customers for their personal security details. So any email a customer receives which requests information such as passwords is fake, no matter how genuine it appears to be.”

Be careful and do not respond to any unsolicited emails as one click and you can be another victim of bank fraud.

UK Interest Rate now stands at 1%, as a result of Bank of England’s decision to cut interest rates by 0.5%. The interest rate is now at its lowest ever in the central bank’s history, which spans over three hundred years.

In October, merely four months ago the base interest rate was at 5% but to stabilize the ailing economy, improve consumer spending and to soften the tightening credit market, the bank rate has been cut 5 times ever since then. It is speculated that as the financial crisis will get worse in the coming months, the rate can even drop to ZERO.

The speedy rate cuts are less likely to be passed on to the borrowers especially mortgage borrowers as about 7 million of them have fixed rate mortgages. Banks are also hesitant in passing the rate cuts to the customers with standard variable mortgage rates. So only those 4 million borrowers with tracker mortgages will benefit from these rapid rate cuts provided there is no collar attached with their mortgage deals.

Savers, on the other hand are also feeling frustrated and are baffled over the falling interest rates. They are forced to cut down their expenses as banking away their money did not deliver expected results.

The question that lurks in the mind of many is how long will it take the bank rate to come down from 1% to 0%?