UK Debt

It may come as no surprise to know that, as a nation we’re deeply in hock! It probably won’t shock you to learn that we owe something in the region of £1,160bn in household debts. And you probably won’t even raise an eyebrow when we tell you that domestic debts often exceed ten thousand pounds; or that in the UK alone, more than ten million people struggle to obtain credit.

We’re bracing ourselves for more and more personal insolvencies – tens of thousands – and rising, each and every year. We get into debt at a younger age, and we stay in debt longer than ever. So when did we get into such bad financial habits. What are the causes? What can we do about it? And when did it stop being such a shock to our collective system?

It doesn’t matter if you’ve heard the statistics or not, the plain fact of it is that we’re getting immune to them. Every day, the numbers rise, the figures pile up and we sink a little deeper into debt. It’s not that we’re past caring; it’s just that so many of us are singing from the same song sheet!

Debt is a seemingly inevitable part of our lives. We’re not shocked by it, because we’re too busy dealing with it. National statistics are all very well, but for many of us, dealing with the harsh realities of debt is part and parcel of our day-today existence. What can the statistics tell us that we don’t already know?

So how did it come to this? Increased borrowing is certainly partly to blame. Whilst we’re tempted by the ‘pay later’ packages, we often fail to take account of the repayment plans, let alone the interest charges. Credit card borrowing continues to fluctuate; and bear in mind that most of this borrowing is secured on our homes. Added to that is the overall trend of rising interest rates, which have meant that whilst savings may have flourished, debts have continued to spiral out of control.

Advice on how to handle fluctuating interest rates varies, but seems to suggest that if we’re earning, we should be careful not to over commit to saving or debt repayment; paying off just enough to keep our debts under control, but leaving ourselves with sufficient disposable income to cater for the unexpected. It’s a difficult line to tread.

That’s all very well, but when we’re in debt and we just want to get out of debt, how do we do it? Which debts do we pay first? Should we consolidate our debts? Do we need to take out a loan to cover our debts? How much should we pay? When should we pay? What should we pay? After all it’s not always easy to differentiate between priority debts and non priority debts; the difference is crucial and the potential implications may be critical.

The big problem is; we’ve all been so busy tackling the effects of debt, that we’ve forgotten the root cause – the relative financial illiteracy in the UK. Why are we in debt? We’re in debt because so many of us simply aren’t skilled in handling our money responsibly. We’ve never been taught, trained or tested. Why is that? After all, if we want to drive a car; we take a test. But if we want to take out a mortgage, we just sign on the dotted line. Schools have only recently begun to educate future generations in budgeting, buying and saving. Hopefully, these efforts will come to fruition over the coming decades.

But here and now, there’s still plenty we can do: not only to stem the tide of debt, but to break the behavioural patterns that led us into debt in the first place. UK debt may be rising, but chances are, if you follow the sane, sensible advice on this site, you can get out of hock and stay out!