John Fairhurst from free debt advice company Payplan explains why debt is a growing problem in Britain and what you can do to get your finances in order. He offers some debt-busting tips to boost your financial well-being.
The economy might be off life support, but the latest figures show that people in Britain are poorer than they were a year ago as wages fail to keep up with rising prices. Spending on credit is back with a bang as card debt rose about six per cent in the last year. But even though many people are struggling to make ends meet, only one in six of those battling debts seek any advice at all.
Debt is a cornerstone of the twenty-first-century economy, but many of us have a peculiar relationship with it. An unpleasant stigma attaches itself to personal debt, but, used responsibly, it’s an important part of many people’s financial lives. Think of all those debts that facilitate modern life: mortgages, car finance, business loans and more. Yet regularly people struggling with their debts feel like they’ve failed or have been irresponsible.
The truth is that debt can be a double-edged sword, and many people find themselves in debt spirals, taking out loans to repay what they already owe. But life is expensive, and with average salaries failing to keep up with rising prices for the last five years, many are finding that they’re actually poorer in real terms and are turning to debt to maintain their quality of life. Debt can quickly go from a responsibly used support mechanism to a crutch without which it is impossible to stand up. Credit cards are one of the easiest ways to make the problem worse, as it is all too easy to shift more costs on to plastic and then only meet the minimum payments each month. There are a huge number of indebted people treading water in this way, but are they really improving their situations? It isn’t just a problem among those in lower income brackets; research from the Money Advice Service last year found that nearly a fifth of those struggling with debt are from families with a household income of more than £30,000. At Payplan we are seeing more outwardly established and even successful people than ever coming to us for help. They are often settled in long-term relationships or in a growing family, they own their own homes, and their incomes appear large enough to provide a relative degree of comfort; debt problems span all social classes and family types. There should no longer be a need to feel that debt problems are your fault, but according to the Money Advice Service, only 17 per cent of over-indebted people ask for help It’s all too easy to find yourself in a situation where your budget is balanced so precariously that any slight shock can tip you into the debt spiral; your car might need costly repairs, or your washing machine might break down. Carrying too much debt can take you on a stressful and emotional journey from believing you can cope, to mounting costs and increased reliance on credit cards, and finally ending up not being able to sleep at night as you think about how to make ends meet.
The reason most people solider on without help is a combination of the societal stigma associated with over-indebtedness and a belief that seeking help will shut off the tap completely and lead to a significant drop in quality of life, which simply isn’t true.
Getting professional help with your debts doesn’t mean you have to live on bread and water; in fact, it’s quite the opposite. The aim of a debt management plan (DMP) is to help pay off your loans at a rate that you can realistically afford. Your life won’t be extravagant, but you should be able to afford the odd luxury such as swimming lessons for the kids or a drink on a Friday evening that just weren’t possible before.
The most important thing to remember is that getting help ensures peace of mind; you won’t have to lay awake at night worrying about where the money is going to come from for the next bill. One of the most common things our clients say is that they wish they’d sought help sooner; if you’re worried about your debt levels, don’t leave it another minute.