Debt can happen to all of us. For many it is due to making the wrong decisions, adopting an unaffordable lifestyle on credit or just ignoring financial problems. But even for the most prudent debt can come unexpectedly when life happens – redundancy, major illness or huge bills for home or car repairs. Debt counselling can help people come to terms with these issues.
People with debt problems can feel powerless to do anything, maybe they suffer shame and become depressed and anxious. The threat of bailiffs and repossession can wreck relationships, play havoc with mental health and cause poor work performance.
Debt management services help to sort out the paperwork of debt, but most can’t provide emotional support to the people in debt.
Debt counselling addresses the underlying causes of the debt and will help to sort them out . They will also help with any personal issues caused by the debt. Your debt counsellor will look at how you got into debt in the first place. They will then look at how can you prevent yourself from repeating your mistakes. You will need to look at yourself and lifestyle and work on things you need to change.
The ways we get into debt
Addictions to alcohol, drugs, gambling, food, sex and shopping can all lead to debts spiralling out of control.
An addiction develops when a person begins to rely so heavily on a certain substance or activity for pleasure/comfort that they start to lose control.
Easy credit and a desire for instant pleasure means a large number of people in the UK are living beyond their ability to pay. Around 11% of workers are forced to use their overdrafts before their pay is put into their account.
Many people only feel valued or liked by others if they have the latest style of clothes, a flashy car, the latest hair style, the most advanced gadget, etc. To do it they by on credit. Eventually they can’t afford to pay it all back.
Bad financial decisions
Some bad financial decisions include:
- Buying property at the wrong time – Many people buy as the market goes down.
- Investing in the wrong stocks and shares – Usually by not seeking proper advice or buying on a whim can leave people greatly out of pocket.
- Having a payday loan – Most people are now wise to the very high interest rates but there are still dangers that a single loan can escalate into huge debt.
Neglect and avoidance – not acknowledging their is a problem
Some people will use their bank and credit cards blindly while neglecting to check their balances and credit limits. They are avoiding the reality of their spending behaviours which over time and result in serious debt.
Unexpected life changes
- Redundancy – being suddenly out of work can throw your whole life into disorder and cause financial chaos. Usually redundancy payments are not great enough to pay off all the debts.
- Death – the family often finds it a huge struggle to survive on the reduced income or benefits
- Divorce – The high cost of divorce proceedings and the division of incomes, often creates a new debt.
- Disaster – Fires, floods, earthquakes, high winds etc. can throw life into complete chaos. People are often homeless, unable to work so have no income. This often results in major financial problems.
Are you worried about your debts?
Being in debt can create the following anxieties:
- I am not going to be able to pay my rent/mortgage, rates or my bills next month.
- My debt will never go away, I am stuck with it for life
- The only way I can pay it back is by taking out a bigger consolidation loan
- Family and friends will be so ashamed of me.
- Will I have to go to court? I have got to go to court
- What if they sell my house and things to pay the debt?
- Where will I live? I will be on the streets.
- Will my husband/wife/partner leave me? Will they forgive me/
- My children will think I’m a bad parent.
The stress of worrying about being in debt can be more serious and cause more damage to the person than the debt itself. The emotions associated with debt can lead to the development of serious mental health problems including anxiety, depression, eating disorders, addictions and even suicide.
Debt and relationships
Money can be a marriage/relationship breaker. Secrecy and dishonesty cause massive resentments and trust is destroyed. The guilt and stress of the debtor can all take their toll and cause depression and anger. Debt counselling can help with fallout.
Debt and work
Money worries are often very distracting and frequently lead to poor concentration and performance at work. Debt counselling can help with people to cope and improve their life.
Debt and mental health
Common mental health problems associated with debt include:
- depression and little or no motivation
- anxiety, fear or panic attacks
- stress, anger and mood swings
- low self-esteem, poor self-belief
- low self-confidence
How can debt counselling help?
- Help, in the form of advice and support is available to you from debt counselling.
- It may take time and need major lifestyle changes, but you should be able to settle your debts one way or another.
- No matter how hopeless or helpless as you feel at the moment as things get sorted and you start making a dent in the debt you will start feeling much better.
Debt counselling is there to help their clients to:
- make a list of all the money they owe and who it is owed to
- prioritise these debts
- decide on a budget they know you can afford
- contact all creditors and let them know about their situationmake agreements with the creditors to pay them off
- pay off the debt in affordable amounts, however small they may be
- learn how credit, credit cards and mortgages work
- destroy all their store and credit cards
- find ways they can earn extra money to pay the debts off faster
- avoid loan sharks or ‘quick-fix’ solutions – payday loans
- seek independent expert advice, if needed, to avoid losing their home and possessions.
- learn how to plan and organise a budget.
- understand how they can rebuild their lives