Last week George Osborne, the shadow Chancellor, said that Britain must become a country of people looking to stop spending and start saving – but what can you do to become a saver instead of a spender?

Osborne said: “The long term priority is to re-focus from the rush for short term gains to the pursuit of long term returns – because in short, you cannot build lasting prosperity on a mountain of debt.

“Our households have become the most indebted of any major economy, more even than America’s, with debt to income standing at 175% for the average British family compared to 140% for the average American family.”

Anne Young, savings expert at Scottish Widows says: “We must be encouraged to save more. Research from Scottish Widows reveals the nation’s savings behaviour is being severely affected by the current difficult economic environment. Over four out of five Brits say having no money is a major barrier to saving. The burden of debt on people’s pockets impacts people’s savings, as 42% cited it as a barrier to saving this year.

“It has become more of a priority for people to reduce their current debts and simply get by on a day to day basis rather than saving for their futures. However while paying off debts should still be a priority, in climates like these, it is important to save even a small amount now to get into a saving habit and build up some capital. And we should all regularly review what we are doing as our ability to pay debts and save can change.”

So debt must be cut before saving can begin, and that’s tough when people are struggling with rising credit card rates, soaring personal loan fees and financial responsibilities in all other directions. It makes it impossible to think of the long-term when your short-term debt is holding you down.

So get rid of the debt using your home’s equity and get on with becoming a saver instead of a spender. Using a second mortgage’s low rate you can consolidate and save every month, giving you the room to move in the right direction for the long-term.

SOURCE: Conservatives, 08/06/09, Scottish Widows, 09/06/09

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