Debt Awareness Week
by James Postlethwaite, Marketing Officer – Connecting Choices
Today marks the start of debt awareness week which runs between 22 – 26 March. Debt awareness week first launched in 2014 and is about opening up the conversation to encourage people who need help or advice to seek it. This year is of significant importance as people’s finances have been under pressure more than ever due to the ongoing pandemic.
This week we have included tips you can use to help you if you are experiencing a debt problem.
8.3 million people in the UK were over-indebted and 22% of UK adults had less than £100 in savings which makes them highly vulnerable to a financial shock such as a job loss or an unexpected bill.
How many people are affected by debt?
According to the Money Advice Service it is estimated that 8.3 million people in the UK were over-indebted and 22% of UK adults had less than £100 in savings which makes them highly vulnerable to a financial shock such as a job loss or an unexpected bill. The pandemic has widened the gap as the average amount of debt owed in the UK per person now stands at £9,246 and 11.36% of new debt is due to furlough which has seen employee’s incomes drop. The cost of debt per furloughed employee due to furlough pay is now -£1,050 and 20% of people have taken out additional credit cards and loans to pay off COVID-19 debt.
Do not be afraid to seek help
Taking the first step is always the hardest and recognising there is a problem. People face many barriers to discussing their debt problems such as feeling embarrassed or not knowing how to open up to their friends, family, or creditors about their situation. This can be the hardest step in your journey to being debt free due to emotional barriers.
If your debt is in crisis you need to seek advice from debt counselling organisations. These will be able to assist you with the best solution for your needs. This could be in the form of debt management plans (DMP), individual voluntary arrangement (IVA), debt relief orders (DROs) and bankruptcy as a last resort.
Debt counselling organisations you can contact:
Do a budget taking everything into account
Doing a budget is central to becoming debt free and should consider every single outgoing including earnings. This will give you an idea if there are any areas you can cut spending back on and use these funds to pay off part of your debts. Using the calculator provided you will be able to work out your budget and identify areas you could save money.
Managing your Credit Card
Credit cards can be useful tools when used correctly, however reliance on credit can soon make a small debt spiral out of control. By setting up a monthly direct debit preferably paying off the whole balance will make sure you do not forget to pay your bill on time and not incur additional interest charges. If you fail to make the minimum repayment this can affect your credit rating in the future and lead to higher interest rate charges increasing the amount you owe considerably.
Click here to read this article from StepChange outlining everything you need to know about managing your credit card.
Prioritise your debts
Make sure you cover the minimum payment on every debt you have to avoid default charges and protect your credit rating. After this you should then pay the most expensive debt first depending on charges and interest rate.
Sell unwanted items
Selling unwanted items can raise money to pay off small parts of your debt. By de-cluttering your home you are not only adding extra money but by clearing the space in your home it can improve your mental wellbeing.
Identify your triggers
Once you have your finances on track it is important keep track of all your spending habits. By putting money into allocated pots for each area it will ensure you do not overspend and will have to wait until next month to buy again. Identifying your spending triggers will also help you to develop better money management skills, which will give you more disposable income in the longer term.
How Connecting Choices can help
The Connecting Choices programme can help participants financially in the following ways:
- Support with budgeting and money saving ideas.
- Signposting to other support agencies and help with raising DROs.
- Assistance with utility providers and help with contacting them by looking at schemes available to participants with utility arrears, debts or changing tariffs.
- Help with applying for benefits.
If you know someone in Stoke-on-Trent, Staffordshire Moorlands or Newcastle-under-Lyme that we can support please contact Natasha Church, Head of Service: firstname.lastname@example.org or 07919 004301.