Gregory Pennington

March 26, 2009 08:43 ET

Debt Management Could Ease Pressure of Falling Earnings

LONDON, UNITED KINGDOM--(Marketwire - March 26, 2009) - Responding to new statistics showing that average earnings have fallen for the first time since comparable records began in 1991, debt management company Gregory Pennington has reaffirmed the importance of good financial management in the recession, adding that people in debt could be at particular risk of financial difficulties if they experience a fall in income.

Figures from the Office for National Statistics (ONS) revealed that average earnings, including bonuses, fell by 0.2% in January 2009 compared with the same month in 2008.

The fall is likely to be a result of falling bonuses and commission combined with salary cuts for employees working in the companies that have been hit hardest by the economic downturn.

Indeed, the statistics show that certain areas of employment were worse affected than others. While workers in the private sector experienced a 1.1% reduction in income on average, workers in the public sector (e.g. local Government) experienced an average 3.7% rise in earnings - 0.7% higher than inflation for the same time period.

However, average earnings excluding bonuses told a different story, rising by 3.5% in the three months to the end of January, suggesting that people who only receive a basic salary may be more comfortable than those who have previously relied on bonuses to supplement their income.

A spokesperson for debt management company Gregory Pennington said: "It's to be expected in a recession that when companies need to cut back, bonuses and commission are two of the first things to go. Workers with a heavily commission-based salary structure are also likely to be suffering due to reduced demand in the economy, and therefore fewer sales.

"A fall in income can make things difficult for anyone, but it also poses wider problems for the economy. Since more people will be forced to spend less, most businesses will experience a reduction in cash flow, which leads to more reduced incomes and job losses - and this can become a vicious circle that is difficult to get out of.

"With this in mind, it's clearly very important that people are especially careful with their finances in the coming months. Nobody can fully predict what will happen in the economy over the next few months, but people who have organised their finances well have a good head-start when it comes to getting through a recession."

The Gregory Pennington spokesperson added that getting on top of any troublesome debts is particularly important - and a debt management plan is one way of doing that.

"A debt management plan is particularly suited to people with multiple debts who can no longer afford to meet their required minimum payments. With average earnings falling, this could help people to ensure that they are making regular payments towards their debts.

"However, there are a few things to consider. If the borrower simply cannot see themselves repaying their debts in full within a reasonable period of time, then another debt solution such as an IVA (Individual Voluntary Arrangement) may be more appropriate.

"As with any debt solution, people looking to tackle their debts should speak to an expert debt adviser beforehand to help establish whether a debt management plan is right for their circumstances."

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