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

 

PAYDAY LOANS IN THE NEWS AGAIN

I appear to be stalking Simon Read of The Independent. If so, that’s because payday loans are again in the news and this is a story and a cause he has taken up and because he writes well on the subject.

The latest twist in the story: research by Shelter (a UK housing charity) reveals around seven million people are turning to credit to try to keep a roof over their heads.

A million use payday loans to cover rent or mortgage

In the past year alone, almost one in seven of those – i.e. just under one million people – have resorted to payday (i.e. emergency) loans to cover rent or mortgage payments.

The Independent has warned that payday lenders are cashing in on the struggles of millions who are unable to borrow from mainstream lenders and those companies charge interest rates of up to 5,000 per cent.

The impressive Campbell Robb, CEO of Shelter, said that this “… shows the extent to which millions of households across the country are desperately struggling to keep their home.

“Turning to short-term payday loans to help pay for the cost of housing is totally unsustainable. It can quickly lead to debts snowballing out of control and to eviction or repossession and ultimately homelessness.”

 What’s the alternative?

I cannot disagree with anything that’s been said above. It’s a sad state of affairs and I’ve no doubt payday loan companies in general are cashing in on the misery, despite what was said by the boss of Wonga to Simon Read and which I reported in an earlier post. There have been calls for these firms to be outlawed. But for the people who feel they have no alternative, what will they do if that happens?

Anyone in debt crisis who consults an adviser at one of the debt charities – such Citizens Advice or National Debtline or CCCS, here in the UK – would probably be told to avoid payday loans. But I wonder how many of the million people mentioned in Shelter’s report have actually talked to such an adviser.

I know that these resources are stretched; and as the charities reply to some extent on grants from the public sector, they may well become even more stretched because of spending cutbacks.

Need for financial advice

I don’t know the full answer – and of course it’ll be different in every case – but wider access to free, impartial and high-quality financial advice must be part of it. What’s more, financial education has to have a higher priority than it does now.

WANT TO KNOW MORE?

For the Simon Read article (4 Jan) click here:

For information about my book “Back to the Black”, click here:

 

 

 

 

IS IT SAFE TO PAY YOUR RENT OR MORTGAGE WITH A CREDIT CARD?

 

A recent news item (Channel 4 News, I think) flagged up a potentially alarming problem that’s been caused by the recession. (Yes, that’ll be the recession that the experts say is now officially over. Try telling that to someone who has lost their job.)

 

What’s the problem? According to a report by the charity Shelter, there’s been a large increase – possibly 50% in a year – in the number of people using credit cards to pay their mortgage or rent.

 

Does this affect owner-occupiers? Or tenants? Or both?

 

According to the BBC website, the Council of Mortgage Lenders (CML) suggests that the problem has been sensationalised by the media. That may be true. It would not be the first time. I should point out the obvious, however: the CML’s concern is only for mortgages. What Shelter describes may well be more of a problem for tenants than for homeowners. Mortgage rates are exceptionally low at present, so it’s less likely that an owner-occupier will have difficulty meeting housing costs, other things being equal. Also mortgage payments are normally taken on a direct debit, the CML says.

 

The reduction in housing costs caused by low mortgage rates has not yet been mirrored in reduced rents (why not?? Logic tells me it should be). Therefore, other things again being equal (which they never are) a tenant is more likely to be tempted to solve a short-term cash-flow problem by paying the rent with a credit card.

 

Is the story true?

 

“In the current climate”, I would not be surprised if there has been an increase in the number using cards. But has the increase really been 50% in a year? That’s massive. What they say, if you read the various reports, is that it’s gone from 4% to 6% and that is indeed an increase of 50%.

 

Firstly, you’d have to ask how big was the sample; obviously they didn’t interview everyone in the country (well, they didn’t ask me, anyway). And secondly, here’s a bit of a giveaway. Last year’s survey calculated the number of households, rather than individuals, that fell into this category. However, “the figure for households has not been calculated this year”, according to the report. So are we comparing apples with oranges, to make a point?

 

So is it safe to pay with a credit card?

 

Back to the question at the top of this post; is it safe to use a credit card to pay your rent or (less likely) your mortgage? The answer is a cautious yes, but only under certain circumstances. Credit cards do not have the astronomically high interest rates of payday loans, but the principle is the same. IF there is no alternative, and IF you are 100% sure you can pay off the card in full before the interest kicks in (you have 4-6 weeks to do that) then fine. If not, then as I have said many times before … get help from one of the debt advice agencies (for example Citizens Advice, or Consumer Credit Counselling Services, or National Debtline) and put together a plan. If you don’t, you could find yourself on a slippery slope.

 

I’ll be following up this story. “Watch this space”, as the saying goes.

 

 

 

WANT TO KNOW MORE?

 

Here’s a piece on the website of Shelter, who produced the original report:

 

http://england.shelter.org.uk/news/january_2011/2m_pay_for_home_on_cards

 

And here’s an item about the story on the BBC website:

 

http://www.bbc.co.uk/news/business-12120937

 

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My book “Back to the Black: how to become debt-free and stay that way” is now available to sample or buy, as a multi-format e-book, at: http://www.smashwords.com/books/view/22886