The Institute of Financial Planning (IFP) has urged consumers to go ‘back to basics’ in their approach to household finances in order to avoid unnecessary debt.

Following this month’s interest base rate reduction to 0.5%, the IFP has claimed that low rates will make little positive effect on the bank balances of the British public, and that people should use any money saved by the decrease to reduce their debts rather than go on a spending spree. Debt management is extremely important and everyone should regularly check their finances.

Savers should also carefully consider their financial outgoings, as rate cuts of 4.5% over the past year have dramatically reduced the amount of interest that their nest egg will generate.

Financial Planner Alan Dick has warned that the average family must get a firm handle on their income and expenditure by carefully constructing a monthly budget. He also advised that by changing consumption patterns households can locate where savings in their expenditure can be made. He also encouraged families to minimise financial wastage paid in unnecessary taxes and charges.

Dick then warned that savers should not be tempted to swap traditional savings accounts for riskier forms of investment such as corporate bonds, as they are not a replacement for cash, and consumers could end up losing their savings given the current trouble in the economic market.