Disagreeing over debt!!!!

ace2base_2

Ninnins wrote: »

When I look at what we could be doing with the money that I am having to use to repay debts, and think back to the profligacy and waste of the last two decades, I wonder that I didnt do something about it much sooner before it got to be so large.

Oh, how your words struck a cord FireWyrm! Right now I have £27,000 of unsecured debt, a £220,000 mortgage and only 8 years from retirement. Mitigating circumstances are a divorce, putting two children through university, and as you state, two decades of the "buy now pay later" mentality. How I wish I'd never set eyes on a credit card, loan or store card. I am feeling so overwhelmed, have had "light bulb moments" a plenty over the last few years but not been able to stick with the programme - mainly due to my head not being in the right place. A wise person said to me twenty years ago "sort your head out first and the rest will follow". Debt is not just about spending money. The spending is a symptom of a deeper root. For some. For me.

The sage has spoken!

Tommy81

National_Debtline wrote: »

Hello there,

It's an interesting question - and as the others have said already, it's all relative. Not only when you consider overall indebtedness compared to overall income but also when you think about affordability.

We tend to think about debt as being either manegable or unmanegable. Someone could owe a very significant sum indeed but be able to pay it off over a reasonable period of time. I've spoken to callers who have owed six figure sums on credit debts such as loans and cards - and they've been able to get the debt cleared reasonably quickly. I've also spoken to callers who have been at their wits end because they owe £110 on a catalogue (their only debt) but don't have the means to pay it at all.

To give you an idea of a typical caller, and what they might owe, here are our statistics for March:

3% of callers had no debt at all
41% of callers owed between £1 and £5,000
31% of callers owed between £5,000 and £15,000
11% of callers owed between £15,000 and £25,000
9% of callers owed between £25,000 and £50,000
3% of callers owed between £50,000 and £100,000
1% of callers owed over £100,000

These figures do not include what might be owing on a mortgage or secured loan unless there are arrears - and then we would only include the amount owing as arrears.

Best wishes,

David @natdebtline

Thanks David, this is really interesting


Do you think that these are representative of all people in debt?


I have seen other posts relating to people with higher incomes having the highest debts ( I suppose I am in that situation) and I wonder if these people are less likely to call the helpline for advice as they think that they can sort it out themselves OR that they will be questioned as to why they got into so much debt despite having a good income ( I know that you are non judgmental but this could be an issue??)




My gut instinct is that more people owe between 25k-50k that these figures suggest, especially when you factor in car finance etc.

Tommy81

getmore4less wrote: »

if you have a similar lifestyle and mortgage where is/has all your money gone?

£25k net £1600-£1900
£64k net £3680-£4100

With all that extra debt and extra income probably approaching £2k per month it suggests that you don't have similar lifestyles.

Our debt has built up over years when we were not earning nearly as much. We also had a spell when my wife was on maternity which is when it spiralled a bit. I am not making excuses as we should have budgeted!!


Our lifestyles are similar on a day to day basis although there is no doubt that we have wasted money on overspending

sourcrates

My late parents would turn in there grave if they had known my total debt before my IVA. Just looked at the paperwork to confirm the amount, and it was a total of £54.000,:eek: my average income over the 20 odd years this debt took to accumulate was around the 15-20k mark, there generation did not have the luxury or burden, of credit, and had to "make do", wear as when I was in my 20`s I had credit cards and loans practically given to me, if I could afford them or not, the banks were falling over themselves to give away money, and of cause we lapped it up, then came the crash, and everything changed, but its seen as normal now to have credit, and to be in debt, then if something happens, like a job loss, or illness, and we cant repay our debts, everything collapses, I just think its a sad reflection on todays society were its seen as normal to have debt.

redmel1621

I find it interesting that income increases so often lead to an increase in debt.

My husband and I have gone through the complete cycle. Very low income i.e living on just his dole money, then just my part time income and for years we had no debt. Then as we both got full time work and 'worked our way up' we got a mortgage, car finance, loans secured on house, catalogues, credit cards.... because we could, and we could afford the monthly repayments. Then along came children and redundancy and after 2 years of drowning in debt we couldn't afford we lost everything! We were lucky in that our house had increased by over double and we managed to sell it just a couple of weeks before our repossession hearing. so everything was paid back from the proceeds and we were left with a small pot of money ourselves.

We both suffered pretty badly from that and it has taken us quite a long time to recover from it.

However we are now back on a low income as my husband works part time while studying part time and I am a full time student. But again we have virtually no debt. Well a credit card that has a balance of £400 that I am hoping to clear and not re-use after May. and we also have a catalogue that I am in the process of paying off also. Although I am happy to keep that going as I usually keep the balance to under £300. It is only higher at the moment as my washing machine broke down so I ordered a washer and dryer not long before christmas.

I am determined not to get stuck in that cycle again and maybe one day, when we have completed our degrees, we will try again for a mortgage but I will never have car finance or secured loans ever again!

I think it is sad when I see my younger sister just starting out on the income increase/debt increase trap.. Her husband just got a new job with a much higher wage and they immediately went out and got a £7000 secured loan against their house :-(

getmore4less

The problem starts because the spends are ahead of the earnings curve and geared heavily with the longer loans because you have "spare" cash.

Say you have £300pm "spare"

Mortgage
5% and 25y is £55300 so can buy part of a house, but cost £36000 in interest.

but you will have had somewhere to live(no rent) and if kept in decent condition an asset.

Loan
10% and 5y is £14100 buys you a nice car, but cost £3800 in interest and after 5 years is probably worth £5k.

But you have had the utility of a car which probably needed to earn.
The alternative is run a cheaper car and start saving up for the next one frees up another 3800 less the extra costs of running the cheaper car.

Credit card.
20% over 1 year will get you £3240 cost £362 in interest.

Could kit the house out with white goods with say a 5-10 year life cycle so plenty of time to save up for the replacements.
or you could spread the purchases over a few months saving the £362 allthough a job lot from a discount supplier may come with extra discouns and reduced delivery charges find a 0% cc an the borrowing could save you money if you needed the items.

The issue with the longer borroing times is you become a earnings slave, you have to earn that money to pay off the debt.

Another thing is never borrow money to buy something over a longer term that the lifecyscle of the item being bought, aim for 1/2 and use the other 1/2 to save for the next one.

eg. borrow to go on holiday, max loan is 1 year, better is 6 months and save for the holiday next year better still is save the money and go on holiday a little later.


Not all borrowing is bad as long as the costs and lifecycle is thought through.
eg if you know you will need something so are saving up for it, then a deal comes up that saves you 25% of the target price but you only have 50% saved up borrow the other 25% even after the costs you will still be up.

getmore4less

Tommy81 wrote: »

It seems strange to me that people only look at the top figure without considering it as a relative amount. She genuinely couldn't see why her debt was just as serious as mine.

You have to come at it from a different angle, it is not the size of the debt or the income but the plan to get rid of it.


If you really keep to the same lifestyles as them and throw your excess income at your debt as has been shown on the other thread you are debt free in 2 years easily.

Ask them about their plan to become debt free.

Firewalker

There are many things that get to play in how people perceive their debt. One of these is emotion - because of emotion the same amount of debt can seem a large burden or nothing to worry about (all other conditions kept equal; this is how it was between my husband and me - same debt, same income, same life style and entuirely different perceptions of it).

The rest is a matter of arithmetic and good sense. Having higher debt and alos higher income is better than (even when proportions are the same) lower debt and low income. On a low income one has much less space to maneuver and cut expenses.

This is my experience, anyway.

National_Debtline

Tommy81 wrote: »

Thanks David, this is really interesting


Do you think that these are representative of all people in debt?


I have seen other posts relating to people with higher incomes having the highest debts ( I suppose I am in that situation) and I wonder if these people are less likely to call the helpline for advice as they think that they can sort it out themselves OR that they will be questioned as to why they got into so much debt despite having a good income ( I know that you are non judgmental but this could be an issue??)




My gut instinct is that more people owe between 25k-50k that these figures suggest, especially when you factor in car finance etc.

Hello there,

I'm not certain that the figures would be representative as it's simply data based upon callers to our charity. It would be really interesting to compare it against general debt statistics though - I wonder if I can find some further information out, I'll look into that.

I've certainly noticed more callers with very high earnings over the last few years. I think the economic downturn has certainly affected the general debt demographic significantly. One of the things I like the most about my work is that I get to talk to people from all walks of life, it certainly keeps me really interested in doing what I do.

I think you have a good point, I would imagine many people don't call us as they think we'll want to scrutinise decision making and why they borrowed the money - in reality it's not generally something that we would ask, what's important is where the caller is right at this moment. As it goes, the vast majority of people fall into unmanageable debt due to an unforeseen change in their circumstances such as loss of job, ill health or relationship breakdown. Occasionally we might have to ask - an example is where someone may be considering bankruptcy but has spent a lot of money gambling. There could be further implications in situations like that.

I would like to think that any who does call finds the service really helpful and the advisers professional yet courteous. From personal experience I've had a lot of unmanageable debt and can remember getting red letters galore, so I know exactly how it feels when creditors start being aggressive.

I'll try and look into more data once I'm back in the office on Tuesday.

Best wishes,

David

Max_Maxwell

What frustrates me is the simple fact that I have always owed money and have absolutely nothing to show for it. Not even a property of my own.

I remember taking out my first credit card at the age of 18. This was the late 80's when business was booming and the banks, stores and finance houses were falling over themselves to give out money to spend. The reality is that at 18, although considered an adult, I wasn't qualified to make rational decisions about finance and borrowing. Things might be different for 18 year olds today and I hope the education system may go some way to addressing such things, but there was nothing about financial management when I was at school.

So I borrowed. From the banks, from finance houses, from stores, why not? Everyone wanted to give me money. And that's how it all starts in innocence and a mind-set of thinking, 'I'm only 18, I'll have paid it all off by the time I'm 20'. And then you turn 40 and the reality hits you like a breezeblock that you've been in debt forever, it's a constant spiral of worry and frustration and it's not getting any easier.

The reason we make wrong decisions is because we are uninformed. We use the knowledge we have, right or wrong, to reach a conclusion or make a turn. When we don't have all the facts or have the tools at our disposal to make a considered and informed decision, likely we will make a wrong turn. Money management and knowledge is no different. Education is the key to decisions about money management as much as it is about which spark plug to change.

I'm pleased to say that I'm undoing those bad decisions now and making informed ones and in 2 years I will be debt free. That will be exactly 30 years from the day I got that letter from Access 'your flexible friend'.