Personal Debt - The Christmas Hangover
A few weeks ago, BBC Radio Four’s brilliant Money Box Live focused on a topic that is always dear to our hearts - Household debt. Informative as ever, the podcast highlighted some pretty sobering statistics about household debt, made all the more poignant considering the timing – the beginning of the year when many of us are emerging from the euphoria of seasonal spending, and facing the bills that we have incurred. Some of the figures that stood out:
Outstanding consumer credit lending rose by £14bn over the year to £206bn (More information at The Money Charity)
Almost 8 million people are expected to fall behind with their finances because of seasonal spending (this was according to research by National debt helpline)
More than 2 million people are stuck with overdrafts. The feeling is that there is a debt cycle and there is no way out.
We’ve had plenty of conversations with our MoneyNoters about debt, and one thing that the vast majority of them used to agreed on was the fact that their debt had built up due to three main reasons:
Lack of appropriate budgeting
Failing to keep tabs on what they earn versus what they spend
Worryingly the Money Box Live podcast indicated that this is no longer the case. The National Debt Helpline believes that many people are now slipping into debt simply by trying to meet their basic household bills including utility bill and council tax, with parking fines, and credit card bills also singled out as key culprits for spiralling debt.
Sadly, one of the common traits that many of those calling in to the programme displayed, and one that we have also seen in some of our MoneyNoters is a “bury your head in the sand” mentality. Many people all but stick their fingers in their ears, close their eyes and sing “LALALALALA” in the face of debt. While this may conjure a rather entertaining image, remind us of our childhoods, or inspire you to start humming that ridiculously catchy Naughty Boy and Sam Smith song, it certainly does nothing to address debt, and will instead inevitably exacerbate the problem, often to rather catastrophic levels (in extreme cases, people have said that stress brought on as a result of rising debt has led to suicidal thoughts).
I’m aware that my synopsis of the podcast has so far painted quite a bleak picture, but please stay with me. Just as the phrase, bury your head in the sand kept reoccurring there was another phrase that also kept popping up, one which I often use myself to MoneyNoters seeking to tackle their debt, - “Believe there is always a way out”.
So what is the takeway here? Debt can be very distressing and may lead to a significant impact on your personal and professional life, but please please always remember that there is a way out. Here are a few steps to help you get started on your journey to debt freedom:
Take action – Not to put ourselves out of a job, but there are charities (listed below) which are willing and able to support you in your journey to find balance. If you are reading this from outside the UK then try to locate an equivalent charity or foundation that can guide you on the right direction
Sit down and start working on your monthly budget. Write down what comes in (your earnings after tax that is) and then subtract everything (and we mean everything down to that daily coffee to keep you going in the morning) that goes out. What do you see? Do you need a budget makeover? We will be writing about that soon.
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