People find themselves in debt for many reasons – for example, poverty, loss of income, redundancy, unemployment, illness, relationship breakdown, a death in the family, or the birth of a child. Sometimes it may simply be due to over commitment.
It can sometimes be hard to spot the exact point at which you realise your debts have become a problem.
In most cases it won’t be one factor which causes the issue but a series of smaller ‘tipping points’ which create a bigger problem. For example:
- Continuing to use a card and consistently repaying the minimum amount so that the balance is never cleared but interest continues to accrue month on month, creating a larger debt.
- Having no emergency fund to fall back on if you lose your job or fall ill and are unable to pay your bills.
- Relying on your overdraft every month to pay your household expenses, so your wages only reset your bank balance each month to zero rather than putting you in credit.
These are just a few examples but there are many more.
In these circumstances some of the common pitfalls are:
- Using one credit card to pay towards or clear another.
- Taking out a further loan to consolidate all your debts or using a payday lender. This may work but you are still incurring further debt, and potentially higher interest.
- Ignore the problem and bury your head in the sand.
What should you do?
Don’t panic and don’t ignore it!
Take a good look at your income and expenditure and consider:
- Is there any way to reduce your expenditure or increase your income?
- Are you paying too much for insurance or other items?
- Are you using the cheapest method for paying your bills?
Debt can cause extra stress and worry, plus your credit rating may also start to be affected. These factors can in turn begin to affect your work, family life and your mental health.
Help is at hand