Reasons why people are commonly getting into debt
It’s easy to automatically assume that the causes of debt are basically down to overspending. But the seven most typical reasons may well come as a surprise. The fact is, the number of consumers grappling with problem debt has grown since 2012 by nearly 30%, according to UNISON and the TUC. Their research has found that a whopping 3.2 million of UK households are now finding themselves to be over-extended financially; representing 1 in 8 households. So why is it happening?
Sudden systemic shocks
The top three causes of debt are unemployment, illness or sudden disability, or another unforeseen cause that leads to a rapid and immediate drop in income. The implications for this are clear: people need to have a contingency fund to cover them in emergencies, and a Plan B. Most financial experts recommend having between 6-12 months of monthly living costs saved in an easy access emergency fund, to ensure that these kinds of shocks can be weathered. It is also important to ensure that you have a conversation with a Cheltenham Power of Attorney professional such as https://beesandco.co.uk/our-services/power-of-attorney-cheltenham/ to ensure that you have all the right things in place should one of you become incapable of making financial decisions.
Another significant cause of debt is the sheer number of people living on low incomes. Even with the new National Living Wage in place, many people struggle with unexpected and large bills on a regular basis, finding that these shocks push them over the edge and lead them into taking on expensive forms of credit, which ultimately make the problem worse. In these instances, debt charities will help them to assess whether they are claiming all of the benefits they are entitled to, and whether there is any opportunity to earn additional income through other means, as well as budgeting more effectively.
The third key area is down to a lack of understanding when it comes to financial issues and topics. This means that people in debt fail to get help before things spiral out of control. This is often because they are embarrassed or because they don’t know where to turn. They may also not know about products such as debt relief plans or an IVA.The good news, however, is that there are solutions for people struggling with debt. A debt advice charity is a good place to start, and advisors can help you to access the right kinds of advice and tools that you need to get back on track and in control financially once again.