Following the COVID-19 pandemic and its aftermath, alongside the cost of living rising quickly, more people than ever in the UK and around the world are in debt. The debt people are finding themselves in may result from utility bills and credit cards to mortgages, car finance, and much more.
In the UK, the average debt per household is £64,000 . Several factors may contribute to this high number, including the rising cost of living, skyrocketing energy prices, and unemployment. In turn, there has also been a sharp increase in debt.
Many people are now increasingly needing to borrow money. There are several borrowing options to consider, including personal loans, payday loans, and debt consolidation loans. However, this is causing those with serious ongoing debt to spiral into more debt, as it becomes increasingly difficult to manage finances.
Who Is Likely to Be in Debt?
Today in the UK, more people are in debt than has been experienced for over four decades. There is no single ‘type’ of person that is more likely to be in debt, yet there are some who may be more susceptible to it. For example, when an employee is made redundant, it increases their chances of falling into debt.
In addition, many people will have essential costs to take care of, such as rent or utility bills, which previously government financial aid could help with. However, the cuts to many income benefits and the rise in living costs have pushed people into borrowing more loans and consequently falling deeper into debt.
Lastly, those more likely to have debt are individuals who may lack financial control. Understanding how to budget money effectively can seem confusing, yet budgeting is one key way to ensure that your money is spent appropriately without needing to acquire more debt.
Why Are People in Debt in the UK?
Many people nowadays opt to borrow more in the form of loans or credit cards. Increased borrowing is often due to rises in the cost of living, low wages, or outstanding debts.
The Rising Costs Of Living
A key reason why more people than ever are in debt is because of the rising costs of living. Housing, food, fuel, and other necessities in the UK have increased, leaving many people struggling to make ends meet.
Several things have contributed to the rising cost of living, such as higher rental and housing costs, political circumstances, and inflation.
The cost of living is becoming a major problem in the UK. It is causing more and more people to go into debt. Everyday living costs, whether that be fuel to get you to and from work, or food shopping, are matters which people cannot avoid and cutting costs is difficult when prices keep rising.
Low Income And Rising Unemployment
Unfortunately, due to the coronavirus pandemic and its devastating aftermath, many more people have been left unemployed and unable to find work elsewhere.
Many people in the UK have been forced to accept lower-income jobs just to make ends meet. And others have been pushed into lower-paying positions because of a lack of available work in their fields.
Living pay cheque to pay cheque like many people are doing can leave you in a precarious situation and can often lead to debt.
Poor Money Management
Aside from factors outside of people’s control, there has recently been a real lack of money management, causing many people to go into debt.
It is important to get on top of your debts before they get on top of you. Cutting down spending by switching energy bills, phone providers, or finding deals on food shopping can help you manage your money better.
A great way to better manage your money is by budgeting every month to ensure that you are spending your money effectively and not causing yourself to go into further debt by spending money on things which may not be essential.
Relationship Breakdowns
During the pandemic, many people lived in isolation with their partners or perhaps were forced to go long distance. Consequently, this may have caused many more relationships to break down over the past few years.
As a couple, many get used to having two incomes coming in each month. Consequently, those that then separate from their partner are drastically expected to change their spending and adjust to a different amount of available money.
This process can be difficult for some, as people may find it challenging to change their spending habits. Therefore, such breakups may have caused more people to go into debt as they no longer have the money to sustain themselves and pay for the things they previously could.
Student Debt
Student debt has been rising for a number of years, but especially for young people, this type of debt is becoming especially difficult to repay.
Going to university or extending your studies can be a great step towards bettering your future employment. However, university living has become extremely expensive today.
Consequently, many more students are now going into debt due to increased tuition and living costs. Luckily, your credit score is unlikely to take a hit due to your student loans and can often be managed in tiny monthly repayments.
Medical Expenses
During the pandemic, the ever-growing pressure and demand of the NHS grew. However, with the long waiting times rising alongside the cut in funding, many more people are now looking for alternative healthcare options and paying more for private healthcare and insurance.
However, private health insurance can be expensive. Therefore, paying for medical bills is another potential cause for people falling into more debt.
How Can I Avoid Debt?
Hopefully, by now, you will have a better idea of what causes people to go into debt. For some people, it may be the case that even with efficient budgeting, they still need to borrow money and may need a short-term loan from time to time. In these instances, a £1,000 loan or a £300 loan could be needed to get through a tough month.
Fortunately, you can still pay for everyday costs, medical bills, and student loans without falling into debt. Good ways to avoid future debt or any debt at all is by budgeting effectively, cutting costs where you can, and by saving money each month.
Nevertheless, we are aware that not everyone is in the same financial position, nor is everyone able to use their money on the same things. However, no matter your income, you can find ways to help yourself financially in the long run.
