Fintellity Features: Unaffordable Debt & Affected Others

How does debt snowball?

Since the pandemic, many people have fallen behind with their fixed commitments such as the mortgage, rent and utilities. Sadly, debt charity Stepchange estimated that the UK could have as much as £6.1bn worth of arrears and debt. The lengths some people are going to in order to stay on top of their finances include borrowing from friends and family, overdrafts, credit cards, bank loans, payday loans, Buy Now Pay Later, appliance rental, gambling and trading. In some circumstances, people can get stuck in a vicious circle by applying for more financial products and services which can result with the individual having a negative disposable income, unaffordable debt and a poor credit score.

There are many people who use payday loans, Buy Now Pay Later (BNPL), gambling and trading as a means to help them overcome a financial issue. Individuals with financial problems may end up making urgent or impulsive purchases and fund them via a payday loan or BNPL, which can sting in the long term with unaffordable repayment plans, if terms and conditions haven’t been read or understood properly. Financial problem can also lead individuals to take bigger risks than normal with gambling and trading services, which can result in huge losses.

Financial circumstances are often deemed personal and private which means people tend to keep their problems under wraps and suffer in silence. In some cases, individuals can even go out of their way to conceal their financial problems. Financial problems can lead to poor mental and physical health, relationship problems with family, friends and employers. In worst case scenarios, those circumstances can snowball and lead to unemployment, domestic abuse, drug or alcohol abuse, theft, fraud, broken families, homelessness and even suicide.

Impact on others

When someone is suffering from financial problems, this can affect the people closest to them. Limited money can lead to a strain on relationships especially if there is a struggle to keep up with fixed commitments, there is a cut-back on non-essential/lifestyle expenditure or the individual in question is constantly borrowing money. This strain can create pressure, lying, mistrust, neglect or even abuse, which can cause a breakdown in the family.

Indicators for Financial problems

• There is a change in their usual behaviour and demeanour
• They seem more stressed or agitated than normal
• They are not participating in their usual leisure activities or hobbies
• They ask to borrow money for fixed commitments normally be covered by their income
• Their reasons for borrowing money don’t make sense
• Money is paid back late or not in full
• They stop telling the truth
• They don’t look well or healthy

What should we do?

Talk to the person you are concerned about and explain that you care, you do not hold any judgement and want to help. The goal is to make them feel comfortable enough to talk openly and honestly about their problem so that you can understand the bigger picture. Once you understand the full scale of the problem, you can consider which external resources need to be approached to help the individual. A good starting point would be asking them to book an appointment with their GP to deal with any health problems and Citizens Advice to deal with the financial issues. It might also be worth offering to attend these appointments with them for moral support. In this situation, it would not be advisable to offer any financial support as this could exacerbate the current problem.

Stayed tuned for our mini series as we cover these related topics:

• Mental Health
• Spending tactics
• Downsizing
• Side hustles
• Savvy business hacks

There are lots of money saving tips available online. Take a look and see how many you can implement to help you become more saving savvy!

We look forward to hearing any feedback or receiving suggestions.

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