Till debt do us part

In January this year, the BBC reported that five million people, which equates to 1 in 10 adults, spend more than they earn each month, according to figures compiled by the financial comparison website uSwitch.com. Overdrafts and credit cards generally provide the funds to enable these individuals to spend beyond their means. The number of credit cards issued has increased to 71 million from 36 million over the past 10 years.

In a separate BBC article, more and more families are relying on 2 or more salaries to make ends meet. In fact, 51% of working families with more than one child feel that they are struggling to cope with increasing household bills and spiralling debt.

In addition to higher mortgage costs and increases in household bills such as council tax and utilities, the uSwitch.com analysis uncovered that spending on non-essential items has risen by 65% over the past decade. Their conclusion is that we are in a “spendemic”.

More worrying than our level of debt is the millions of people feel compelled to hide it from their loved ones. The Sun newspaper, Easier Finance and the Debt Advice Trust have all recently reported that significant numbers of people have secret bank accounts and take on secret debt without confiding in their partners. Apparently 1.35 million British people have secret debts, the total sum of which is approximately £7.7 billion. The reasons for this secret debt vary but may include:

• Clothes, shoes and accessories, (generally women)
• Secret hobbies (typically men)
• Gambling
• To pay off other debt

Debt can seem like the other person in a relationship, driving a wedge between the couple. According to Bankrate.com, debt has the power to wreck a marriage but it is often a silent killer which goes unnoticed by the couple. Frustrations can certainly escalate when the couple is faced with mounting debt and financial hardship. If the couple is forced into taking out a consolidation loan, or entering into a debt management plan or an individual voluntary arrangement, or “IVA”, the more shrewd minded individual of the couple may feel that they are paying for the financial mistakes of their partner.

USwitch.com explains that differences of opinion about spending and saving can put a strain on a relationship and that couples need to reach a consensus about money by discussing their financial situation and trying to reach a compromise. However, many people find that debt is a difficult and embarrassing topic to broach with their loved one, but it is much better to talk about it than let your debts mount up to the point where you need to consider formal insolvency, such as an IVA or bankruptcy.

It may be beneficial to talk to a professional debt advisor, such as The Debt Helpline, who can give free, impartial advice. For advice of a more personal nature, you may wish to contact the Samaritans or Relate.

Finally, you may wish to consider the following measures which may help you regain control of your finances and avoid a formal insolvency:

• Are there family or friends that you could approach for a gift or interest free loan?
• Do you have any savings which could be used to reduce your debts? The interest you receive on savings is often much less than the interest which is charged on a credit card debt so your money could be put to better use by settling some of your debts.
• Could you save money by changing utility suppliers? Organisations such as Which may be able to point you in the right direction.
• If you believe that your financial problems are of a short term nature, you might wish to consider transferring the balances on your credit card(s) to those institutions offering 0% interest on balance transfers for an introductory period - this is not a solution for those with long term financial problems due to the temporary nature of these low or nil rates of interest
• Is it possible to take on some additional part-time work in the evenings or weekends to help pay off your debts? However, you should proceed with caution as working extra hours may affect your health and your relationships with others.
• If more than one member of the household owns a car, is it possible to raise some money by selling one of the cars?
• Are there non-essential items that you can do without, such as satellite television, mobile phones, etc?
• Try focusing on clearing one credit card debt at a time whilst maintaining the minimum payments on the others. Once you have reduced a credit card balance to nil, then you can cut up the card, return it to the issuing financial institution and request that the account be cancelled. Bogof! This is not meant as a term of abuse. When shopping you might want to consider taking advantage of items which are on offers such as “buy one get one free” or “bogof”. It takes a certain amount of resolve not to buy everything that is bogof purely because it is a good offer, but strategic purchasing of items on bogof can save you a lot of money.