Do We Have a “Debt Crisis” in The UK?
If so, How Do We Address It?
This is the time of year when we turn to our friends and family and look forward to the festive time.
Christmas, Boxing Day, New Years, all celebrations and time to spend with family and friends.
It also is a retailers and consumers dream, and for some a nightmare.
Retailers rely on this time of year to make or break them, that is why it is called Black Friday, to put the shops and stores back in the black, and not the red.
As consumers we are bombarded with adverts on the TV, Internet, signs in shops, buy now pay later, big sales and deals to be had, biggest sale ever, you know the drill.
Christmas is a festive time of year, but also an expensive one.
Between the Black Friday and Cyber Monday deals, and also just the marketing ploys used by sells, things like only 4 let at this price, 10 people are looking at this item now, this item has been bought 6 times in the last 5 minutes, all to drive us to feel the need to make that purchase now.
It also can drive us to spend money we may not have, meaning use credit to make the purchase.
This may cause some of us to use forms of credit that are less than ideal, high interest rate loans, or even worse, high risk lenders.
Then after Christmas we have the “debt hangover”, and for some it may take the entire year to get over the debt hangover. For others, the debt just begins to grow and grow until one day it must be faced and dealt with.
Watch For The Signs
There are signs that someone may be struggling financially and with their debts. Most of us know if we are in money troubles or not, but some may fail to see the signs, or simply choose not to look.
* Juggling who to pay and when
* Using credit for everyday purchases such as food
* Collection notices, arrears or defaults
* Using savings to maintain lifestyle
* Your comfortable with maintaining high levels of debt
* Constantly borrowing from friends and family
* Not knowing the balances on your credit cards
* Using your overdraft each month
None of these are sure signs of a financial problem, but for many, they point in that direction.
“UK Debt Crisis”
With the General Election looming and all the promises being made, coupled with the fact this is the time of year when people do place themselves in debt for gifts and the holidays, one has to wonder if any new government, or any change sin government will address any personal debt issues?
Creditors and the government put together a “breathing space” plan over a year ago, allowing debtors a 60 day window to look at options and to sort out their finances before creditors came a collecting.
There are concerns as to if this will be continued, and what else can be done to aid those caught up in the “UK Debt Crisis”.
The government must continue the level of aid and even do more to help those struggling through this crisis.
The Head of Policy, Research and Public Affairs at StepChange, Peter Tutton states, “It would be a tragedy for people in problem debt if the positive work in progress – such as the reform of bailiff regulation and the implementation of statutory debt breathing space in England and Wales – got lost somewhere between this government and the next. So we urge in the strongest possible terms that all the work in progress is carried over by the next government.”
“At the same time, there is so much more that any government could and should do, especially in strengthening the safety nets that can help households build greater financial resilience, and protect them when unforeseeable hard times do strike.”
“We especially urge the next government to commit to measures that will better support the financial resilience of single parents, adults under 40, renters (especially in the private sector), and people with physical and mental health problems.”
We as consumers get caught up in the “conditioning” roles we are to have, and also the priority placed on credit score and credit history.
Many feel credit scoring in its present state is not “fir for purpose”, and needs to be changed.
Then there also is our attitudes and our fickleness as consumers. We as debtors have a responsibility as well.
University of Bath’s Department of Psychology, Dr. Punit Shaw states, “We seem to think we can regulate and legislate against debt. But policymakers need to understand that a top-down approach will have very limited gain because it doesn’t deal with underlying individual behaviours.”
He adds, “We need to raise awareness of the tactics used to part us with cash we hadn’t planned on spending.”
Making us as consumers aware of the tactics we have mentioned to get us to buy, things like 5 people have bought this item in the past, 10 people are looking at this item now.
“The role of education is often overplayed, but we need to look harder at the relationship between psychology, maths and financial decision-making.”
“The reality is that if you can’t do basic maths there are serious long-term implications for your financial health. If you can’t work out that you’re tangibly better off with one purchase over another or one behaviour over another you won’t have the emotional response needed to change behaviour.”
The debt crisis has a responsibility at both ends, lender and borrower, seller and consumer, and education is key.