DEBT AND DEPRESSION

In my book “Back to the Black”, I talk about the psychological effects of being in debt. In fact Chapter 2 is entitled “Mind Over Matter.”

I was pleased to see that this important issue was covered in a recent article by Simon Read in “The Independent” (17 March 2012). I’ll take the liberty of paraphrasing:

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Being in debt is a depressing experience.

“A trouble shared is a trouble halved”; but the annual report of Consumer Credit Counselling Service (CCCS) shows 25% of those in debt don’t share their troubles with friends or family.

It’s understandable that people don’t want to discuss their debt problems. They’re embarrassed that they might be judged.

Admit the problem; don’t delay

However, admitting you’re in financial trouble is the first step towards solving the problem.

CCCS also revealed that 45 per cent of people delayed seeking advice for more than a year after they started to worry they had a debt problem. Many of them had probably carried the worry alone.

Suicides

Many tragic suicides are caused by the worry of debt (and for every suicide there are ten attempted suicides). If those people had been able to talk about their problems, who knows what kind of future they may have had?

Talk to someone

Don’t just worry about debt. Instead look for a way to deal with it. There are many people and organisations that can help.

Help is at hand

CCCS (and the other debt advice charities: see below) are on hand to help.

All of them can help those in debt find ways to put their finances back on track.

Friends and family

Just talking to friends and family could be a good first step on the way to coping with the deep anxiety that money worries cause.

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I had intended to add some thoughts of my own to this; but I think that the article says what needs to be said. I’ve just added information about organisations that can help; see below.

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 WANT TO KNOW MORE?

 ADVICE ORGANISATIONS: CONTACT DETAILS

1. NATIONAL DEBT ADVICE CHARITIES

 (THESE ALL OFFER CONFIDENTIAL AND FREE DEBT ADVICE, UK-WIDE)

Citizens Advice (“The CAB”)

 Free advice provider; registered charity. Funders include central and local government, charitable trusts, companies and individuals.

Face-to-face interviews and telephone advice available at local Citizens Advice Bureaux (CABs). Find your nearest bureau in the phone directory, or search at www.citizensadvice.org.uk

E-mail advice available at some CABs

Advice line: 0844 499 4718

Online help also available: www.adviceguide.org.uk

CCCS (Consumer Credit Counselling Service)

Free advice provider; registered charity. Supported almost entirely by the credit industry.

Telephone counselling 0800 138 1111

Online help www.cccs.co.uk

National Debtline

 Free advice provider; registered charity. Part of the Money Advice Trust, (see below) funded by a mix of private sector donations and Government grants.

Phone advice and free factsheet orders: 0808 808 4000

www.nationaldebtline.co.uk

Credit Action

Money education charity, in partnership with CCCS (see above). Free online advice provider, plus the Spendometer (see Chapter 8), Money Manuals and other resources: www.creditaction.org.uk.

Their “Money Advice Map” signposts to local debt advice centres: www.moneyadvicemap.com/

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 2. LOCAL INDEPENDENT DEBT ADVICE ORGANISATIONS ALSO EXIST IN MANY AREAS AND ARE TOO NUMEROUS TO LIST.

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 3. OTHER ORGANISATIONS WITH HELPLINES OR WEBSITES ON DEBT AND RELATED ISSUES

 

AdviceUK (to find a local money advice centre)

020 7407 4070

www.adviceuk.org.uk

 

Debtors Anonymous (worldwide community with telephone & online meetings)

www.debtorsanonymous.org/

… and to find contact details for local meetings inUK:

www.debtorsanonymous.org.uk/

 

Mind (charity & helpline that helps with mental health problems)

0845 7660 163

www.mind.org.uk

 

Samaritans (confidential emotional support)

0845 790 9090

www.samaritans.org

 

Saneline (support for mental illness)

0845 767 8000

www.sane.org.uk

 

Shelter (free housing advice helpline)

0808 800 4444

www.shelter.org.uk

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For the “Independent” article in full: LINK

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For info about my book “Back to the Black: how to become debt-free and stay that way” (paperback and eBook): LINK

 

UK Personal Debt Statistics: March 2012

I receive a monthly e-mail from Credit Action, listing the latest statistics on UK personal debt. Here are the headlines from today’s e-mail:
  • Outstanding  personal  debt  stood  at  £1.456  trillion  at  the  end  of  January  2012.
  • This  is  up  from  £1.452  trillion  at  the  end  of  January  2011.   Individuals  owed  nearly  as  much  as  the  entire  country  produced  during   the  whole  of  2011.
  • Outstanding  secured  (mortgage)  lending  stood  at  £1.248  trillion  at  the  end  of  January  2012. This  is  up  from  £1.240  trillion  at  the  end  of  January  2011.
  •  Outstanding  unsecured  (consumer  credit)  lending  stood  at  £207  billion  at  the end of January 2012. This  is  down  from  £212  billion  at  the  end  of  January  2011. 
  • Average   household   debt   in   the   UK   (excluding   mortgages)   was   £7,975   in January. This  is  up  from  a  revised  £7,951  in  December.
  • Average  household  debt  in  the  UK  (including  mortgages)  was  £55,988  in January. This  is  up  from  a  revised  £55,843  in  December.
  • The  average  amount  owed  per  UK  adult  (including  mortgages)  was  £29,634  in January. This  was  around  122%  of  average  earnings.
(Source: Credit Action)
WANT TO KNOW MORE?
For further data from Credit Action, click HERE

CALL FOR MORE FINANCIAL ADVICE

Today I read a great piece from Simon Read of the Independent, calling for the wider availability of financial advice. I posted a comment as follows:

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Great piece! More strength to your pen! I absolutely support your call for wider availability of quality financial advice; ten years ago I narrowly avoided personal bankruptcy and found a better solution with the help of two excellent advisers at the local CAB; but not everyone is as lucky and I know what the queues are like at the CAB in Bristol.

Have RTed your tweet.

I too quoted Mr Micawber in a book about my debt experiences (“Back to the Black: how to become debt-free and stay that way”). The version of Micawber I used was worded slightly differently from yours, in that mine was income / expenditure, ending: “Annual income twenty pounds, annual expenditure twenty pounds, ought and six, result misery.”

The debt-to-income comparison you mention is interesting. I found some alarming debt / income ratios in the Times a year or so back, which I interpreted in my book as follows:

As Credit Action’s website succinctly puts it: “Individuals owe more than what the whole country produces in a year.”

The trend of increasing personal indebtedness, a by-product of our consumer culture, certainly contributed to the financial crisis.

In early 2010, a typical UK household containing one wage-earner on average pay has, according to the Halifax (a division of the Bank of Scotland plc), outstanding mortgage debt that’s equivalent to 507% of income (i.e. of the ONS figure for average annual income). By way of comparison, the UK Government’s ratio of debt to income – a ratio that was widely castigated as unsustainable during the election campaign of spring 2010 – was “only” 170%. (“Worried about national debt? Mr & Mrs Average are in a far worse state”: Ian King, Deputy Business Editor, The Times, 19 Feb 2010) Go figure, as my American friends might say.

Most personal debt is of course, at least in the UK, secured mortgage debt: levels of home ownership have traditionally been higher here than in most other European countries. It has always been considered that mortgage debt is safe debt; that was true for as long as the housing market continued its customary rise but at times of recession in the housing market …. Etc, etc

One could also add the risk of rate increases leading to a rise in the numbers of mortgages in arrears, repossession or forbearance … a number that’s already high, as you mention.

 

WANT TO KNOW MORE?

To see Simon Read’s original piece (The Independent, 16 July 2011): http://www.independent.co.uk/money/spend-save/simon-read-rising-poverty-worries-means-advice-is-crucial-2314442.html

To sample or purchase (£0.70 / $0.99) my eBook on managing debt:

UK PERSONAL DEBT TRENDS

My thanks to the charity Credit Action for their latest credit data.

Previously, on my blog …

The last time I blogged about this, I reported that the “write-off rate” on consumer lending by UK monetary financial institutions to individuals increased further in the second quarter 2010 to 7.4%. In that quarter, UK banks and building societies wrote off £3.47bn, most of which was credit card debt.
Secondly, Credit Action reported that average household debt in the UK was £8,590 (excluding mortgages). They went on to say that “this figure increases to £17,896 if the average is based on the number of households who actually have some form of unsecured loan.”

That second statement puzzles me; I don’t agree with the idea of giving a second average that includes only those who have debts. An average is an average, including the highs and the lows and everything in between. If we exclude those with the very lowest debts (i.e. zero), then we should also exclude all those with the very highest debts, i.e. all of the “outliers”.

By the way, if one included mortgage debt, then average household debt in the UK was then about £56,690.

The report concluded that total UK personal debt at the end of August 2010 stood at £1,428bn, a slight increase.

Now for the update

The latest Credit Action report, which I received last week, still gives the second-quarter figure for the write-off rate on consumer lending, i.e. 7.4%; presumably the third-quarter figure is not yet available.

Total lending in September 2010 rose by £0.4bn; secured lending increased by £0.1bn in the month; consumer credit lending increased but only by £0.3bn. (a step-change from pre-recession days: total lending in Jan 2008 grew by £8.4bn)

Total consumer credit lending to individuals at the end of September 2010 was £216bn. The annual growth rate of consumer credit increased 0.3% to 0.6%.

Average household debt in the UK is ~ £8,562 (excluding mortgages). Again, they add, “this figure increases to £17,838 if the average is based on the number of households who actually have some form of unsecured loan.” Again, I find that second figure rather artificial.

Total average household debt in the UK (including mortgages) is approx £57,737; that’s an increase but only a very small one.

Your debt or the country’s debt?

If you thought that figure was highish, the report goes on to say that “if you add to this the March 2010 budget report figure for public sector net debt (PSND) expected in 2015-16 (excluding financial interventions) then this figure rises to £109,960 per household.” Sorry, but that is rather a jump of logic; the PSND is not my personal responsibility, although I would indeed be worried if I thought Mr Osborne would send the bailiffs round to ensure I cough up my share of the UK debt. Thus I feel this excellent report is slightly compromised by making the raw data appear worse through this addition.

And another thing … that last calculation is based not on current government borrowing but the projection for 2015-16; a lot can happen before then. “Things can only get better”, as the song says; at least I hope they will. Let’s hope, in particular, that the PSND in five years is lower than that prediction.

Back to the present

Finally, and if we deal solely in current and personal realities, total UK personal debt at the end of September 2010 stood at £1,455bn; as you can see, that’s a further slight increase. Based on their latest report, the people at Credit Action can still make the same statement that I quoted in my book “Back to the Black”. In their words: “Individuals owe more than what the whole country produces in a year.”
It is sincerely to be hoped that this worrying statement will be short-lived, and that GDP will continue to rise and personal indebtedness will start to fall.
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To find out more about my new book “Back to the Black: how to become debt-free and stay that way”, go to www.back-to-the-black.com

UK DEBT STATISTICS SHOW WRITEOFF RATE INCREASING

The latest UK debt statistics, courtesy of Credit Action, show two interesting trends.

Firstly, the “write-off rate” on consumer lending by UK monetary financial institutions to individuals increased further in the second quarter 2010 to 7.4%. In this quarter, UK banks and building societies wrote off £3.47bn, most of which was credit card debt. In the 12 months to the end of August, they wrote off £10.9bn of loans to individuals.

Secondly, they reported that average household debt in the UK is ~ £8,590 (excluding mortgages) but this figure increases to £17,896 if the average is based on the number of households who actually have some form of unsecured loan. That’s a drop from £22,000 when I last looked, about 6 months ago, which shows clearly that people have been paying off debt.

By the way, if we include mortgage debt, then average household debt in the UK is now about £56,690.

The report concluded that total UK personal debt at the end of August 2010 stood at £1,428bn, a slight increase. Based on that, the people at Credit Action still make the statement that I quoted in my book “Back to the Black”. In their words: “Individuals owe more than what the whole country produces in a year.”