What to Do If You’re thorough in Debt – Ten Tips
CONSUMER BORROWING ON THE RISE
In an article I wrote in 1988 for a popular women’s magazine, I stated that the UK newspapers spoke of ‘record sales’ and ‘expected that as a nation we were heading for bankruptcy’. Bank lending had risen from £560million in 1970 to £15,002 million in 1984 and in the last four years of that period alone, credit card lending had ‘leapfrogged by 158 per cent’.
EXCESSIVE CREDIT CARD DEBT
Twenty years later – despite promises from Gordon Brown, Britain’s then Chancellor of the Exchequer, that we would never return to expansion and bust – here we are with unparalleled levels of personal debt which make the statistics of the 1980’s look derisory. The cause: private borrowing plus ridiculous levels of mortgage lending, both of which appear to have been either condoned or promoted by a government which assured us that we, alone in Europe, had a safe economy with a obtain, low level of inflation.
The descent has been rapid. During my parents’ day, Hire buy – the only method of consumer borrowing and disdainfully dubbed the Never-Never – was a last resort. In my childhood I learned that to save for the doll I wanted was the only way of fulfilling that desire. By the time my own children reached adolescence, however, credit was a viable option. All three ran up debts, and the Bank of Mum and Dad paid them off. Not, however, without penalty. The interest we exacted from our children was not to line our own pockets but to teach them thrift. I’m glad to say it worked.
Sadly, that is not the case for the majority. Spurred on by the evangelistic zeal of a government hell-bent on wealth at any cost and an erroneous belief in our own invincibility, we now find ourselves victims of a can not concentrate. What would once have induced shame and embarrassment in a society which believed in thrift and saving, is now seen as the norm. Shopping has become a pastime instead of a necessity; ownership of the latest ‘must have’ a right ‘because you’re worth it’, and credit card debt a insignificant inconvenience, to be dealt with by acquisition of another card and debt consolidation.
GETTING OUT OF DEBT
Knowing the reason for your indebtedness does not lessen the pain when the reality bubble bursts. In some ways it increases it. It’s human character to want to absolve ourselves from blame, to point the finger at someone else: greedy City fat-cats; blinkered edges; flawed governance. One of the people I interviewed in my original article spoke of the deviousness and pretence which take over your mind in order to alleviate the fear of facing up to the facts. But playing the blame game is not going to get rid of debt. Nor will it bring us peace of mind.
First and foremost, don’t panic. Back in 1988 when I wrote on the subject, bankruptcy was almost certain. Due in part to organisations like The Jubilee Centre bankruptcy laws have been changed, and independent voluntary arrangements introduced. I, personally, know of people who appear to have walked free of debt by entering into this kind of deal and paying off only a percentage of what they owe. Whilst not altogether endorsing the morality of such pacts, I would not want to see anyone at such a point of despair that taking their lives appears to be the only way out. If you feel that’s the only way – don’t! Talk to someone. See below.
My advice, if your level of debt appears to be insurmountable, remains very similar to what it was twenty years ago:
1. Seek help. If family members are unable or unwilling to lend you money, go to the Citizens’ Advice Bureau. They can’t give money, but they will be able to advise and, almost certainly, can position for you to see a special advisor on debt. Ask if IVA is an option.
2. Alternatively, prepare a budget for yourself, with the help of a friend. List income; all basic outgoings; emergency expenses. Deduct one from the other. Divide the net balance between your creditors, apportioning the largest repayment to the biggest debt.
3. Write to creditors asking them to accept the new level of repayment. Most will do so if they see that you are making a genuine attempt to settle your debt: it costs them too much to take you to court.
4. Approach your Local Authority to ask for a rate or rent rebate where appropriate. Ask if both could be made payable weekly. NEVER FALL INTO ARREARS WITH RATES AS THIS IS A CRIMINAL OFFENCE, LIABLE TO IMPRISONMENT.
5. Ask the Department of Work & Pensions if you are entitled to any supplements: eg Family Credit.
6. NEVER borrow more to pay off noticeable debts. This simply increases the problem.
7. Give up, cut down on or proportion everything you can do without. Switch mobile phone contracts to Pay as You Go; look for cheaper/fixed rate deals with utilities providers; choose a simpler hairstyle which requires fewer visits to the hairdressers; eat in with friends instead of out; part-exchange your car for a more economical form; car-proportion for work.
8. Pay everything you can on Standing Order. Not only will this rule to a possible reduction in your bills (or at the minimum avoid a penalty) it will also ensure that you know exactly how much is going out each month, and consequently how much is left.
9. Try to make additional money by taking in a lodger, if possible (check your lease to see if this is permissible). Sell off unnecessary possessions: good quality clothing; stereo equipment; surplus furniture. Or take an additional job in the evenings or weekends.
10. If you have savings use them to pay off as much of your debt as possible. The interest you receive on your savings account is doubtful to be as great as the compounded interest payable on your debts.
Above all, remember that life is sweet and nothing is worth losing it for. If you’re in need of moral sustain, contact Care for the Family. They have various articles and networks designed to help wherever possible. Good luck. And God bless.