Debt is now part of most people's everyday life. We have credit cards, mortgages and loans, using and accepting them as part of our regular financial usage. Increasing home values and low interest rates have made people feel wealthier and able to take on more debt. Britain` s personal debt has grown by 50% in the past five years and now totals a record £158 billion. The average adult owes about £3,400 excluding mortgages. The Bank of England and Treasury have expressed concern. Is the country being crushed by a mountain of debt?
Many families now have two incomes, and long working hours, making for a seemingly cash rich - time poor society. However, the financial balancing act between income from salaries and wages and all the outgoings is very delicate. For some people, being in debt is a way of life, with careful handling keeping creditors at bay. Credit is so easy to come by- there are adverts for it on the TV every day, and tempting offers of easy loans come through the letter box ceaselessly - never mind about paying back. Now many young people are being drawn into this pattern too as they get student loans to fund their degrees. Students graduating last year owed an average of £10,997. This is at a time when the average deposit for a house in the South East is £15, 000 so they face a difficult few years at the start of their working life.
However, the line between managed overspending and risky indebtedness is easily crossed, and one that can be easily upset. The global economic slowdown that has affected share prices and the City plus the effects of the current conflict in Iraq will mean not just a loss of jobs for city traders but will also affect the travel and leisure industries, with consequent effects on people working in those fields. Uncertainty about the future affects consumer spending, this having another knock on effect on over-time and jobs. A drop in income and a rise in interest rates would mean that for many families the delicate financial balance could not be maintained, resulting in the prospect of further indebtedness, a drastic reduction in spending and a change in the living pattern.
There are many pressures on parents today, including the day not being long enough. As they hurry to take children to and from school on the way to and from work the need for a second car may be seen to be essential. Concerns for their safety or a lack of public transport may mean that this is the only practical way of coping with the demands of school timetables and work, but the cost is considerable. Many caring parents are aware that they are not able to spend as much time with their children as they would like, and so wish to buy their children the latest and the best of whatever the current fad is, in order to compensate. A recent report stated that 'pester power' from children was recognisable and significant, and was causing measurable further debt to parents as they give into their demands. Most parents want to please their children, but in addition to wanting their son or daughter to have the latest thing, some are reluctant or unwilling to say 'no' or to say that something may have to be waited for. Sadly parents are also aware of the ostracism or bullying that can occur if a child is seen to be the odd one out with things such as the 'wrong' trainers, non trendy glasses, or no mobile phone. The R.P.I. now lists both mobile phones and designer spectacle frames as standard spending. A further desire to please can mean that paying back the cost of those expensive Christmas presents can last the whole year.
While most parents cope with the balance of income, outgoings and debt on a day to day basis, everything can fall apart very quickly. Redundancy and job loss, separation, bereavement, illness and similar events can happen out of the blue, and to anyone. They have a profound effect on our ability to manage and cope with finance, at a time when most people's resources, and efforts are being spent on getting through the immediate crisis. There is little or no time or energy to cope with the bills that start to arrive. Managed debts become unmanageable, pressure from credit companies mounts, and life becomes even more stressful, difficult and demanding.
I worked for many years at the Citizens Advice Bureau,(CAB) and we saw a lot of people with debt problems, most of whom were in the situation because of circumstances beyond their control. While one client would be worried about a bill of a few hundred pounds, others would arrive in the Bureau and their story would disclose debts of many thousands of pounds. They all wanted help in finding ways to manage their debts, and whenever possible, to attempt to repay them. There were, and there still are, one or two people who would have multiple debts, little means to pay, and have concerns only about their ability to keep spending. We also saw people who because of their circumstances should never have been allowed credit in the first place, and who were then faced with bills way beyond their means to repay. Sadly most CABs currently report that debt problems are on the increase again.
Who can help at a time when troubles can feel overwhelming?
There are debt management companies who advertise their services in negotiating repayments with creditors, but they should be approached with caution, as they charge fees of 15% to 25% of the debt.
Sources of help are local CABs. who offer free and confidential help and advice. You can find your nearest one in the phone book.
CAB website gives information on debt and details of local Bureaux www.adviceguide.org.uk
National Debtline - has a helpline, information pack and fact sheets
freephone 0808 808 4000
Consumer Credit Counselling Service has a help pack and advice
freephone 0800 138 1111
©2005 Val Mussett & Newsline