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Debt in the Current Economic Climate

It feels like we have just passed Christmas and many people tell us it is a wonderful time of year. Unfortunately for many it is a time of the year that is generally fuelled by debt. Some do go over the top and overspend during the festive season. But it is not just Christmas that is responsible for the financial hardship – holidays are a must. Birthdays and other family celebrations put people under pressure financially.

 

The results are debt and poverty has become a daily talking topic. If we take into account the Brexit referendum of 2016 we cannot escape it. What is Brexit? Can you define it? Can you speak to the person beside you and explain it? It apparently seems to be a nice word for a nasty thing? Every time you read a newspaper, we are bombarded by the subject. Some have a relaxed view to it while others have a doom and gloom attitude towards it. Who is right or wrong is not the point? It exists beyond a doubt and many are suffering from it.

 

According to the consumer group Which, more than 2 million working households across the UK are struggling with money worries. It argues that around two and a half million households are working but their financial circumstances are poor. Many experts estimate that the problem will get worse in the next year. The concerns range from the levels of household debt, fuel prices, housing costs, including rent or mortgage payments, food prices and levels of household savings and investments. How can we think of the latter? It is estimated that one in five of those in working or struggling households have taken out loans or credit cards, borrowed from friends and family or used overdrafts. But the sorry day comes when they have to pay it back.

 

We have talked about households who have a low level wages coming in. What about those who have not? They have to live on benefits and in the majority of cases the benefits are not sufficient. They are then forced for the sake of their families into finding other sources to provide money. It is a vicious trap – if you haven’t sufficient income, borrowing will only increase the problem, not solve it. It is known that credit card debt has soared to a record high in recent years. The surge in such borrowing has fuelled fears that households are buying beyond their means and face being buried under debts they cannot pay off. We all know the results of pay day loans and many financial sources selfishly use the situation to make a lot of money by charging exorbitant rates of interest on the money they lend out. Following all this we are told that benefits are being cut, so a really hard time faces many. Also a quarter of consumers maintain their personal household finances are having a negative impact on their mental health. Women are more likely to say their household finances are affecting their mental health than men. People aged between 35 to 44 who are often being squeezed by family responsibilities are more likely to say their finances are affecting their mental health.

 

With the best intentions, debt is so easy to get into. When we borrow more than we can afford we are encouraged unwillingly to spend too much especially when we have the borrowed money at hand and the real difficulty begins when we have to pay it back. Some lenders have no sympathy when the borrowing has to be paid back.   Desperation sets in for some people and may lead them into illegal activities to get money. The solution to some might be ‘live according to your means’. But in this current economic climate, this is much easier said than done.

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