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Debt – the Most Common Causes

Here at Access Credit Management we take the issue of debt very seriously – after all we offer international debt collection services to our clients on a no-win, no-fee basis.  We’re well aware of just how easy it is in the current economic climate to fall into debt so today we’re going to take a look at the most common causes of debt in a bid to offer our readers the foresight necessary to try to stay out of debt.

Unemployment – unemployment, whether it’s due to redundancy or illness can mean that either one or more of a household’s earners is unable to work and this can result in a significant drop in income which will negatively impact a family’s finances.  If you should find yourself in this position, then you’ll need to take a close look at your income and expenditure and attempt to put everything on a minimum spend.  Look at places where you could cut costs, such as eating out, holidays, transport in order to reduce your outgoings.  You should also find out which benefits or tax credits you are entitled to.

Reduced Income – If you’re working on a contract with varying hours, managing your finances smoothly can be challenging.  Try to work out a budget that will work for you in the months when you earn less and stick to this, putting aside any extra money earned during times when you work more hours.  This pot of savings can then be used when unexpected costs occur such as car breakdown and repair.

Divorce – At a time when you’re dealing with emotional challenges you’re also likely to be hit with the legal costs of divorce and the challenge of establishing two separate households.  This makes divorce the fourth most common cause of falling into debt.  While there’s no easy answers, it can be helpful to talk through your new financial outlook with a financial expert or a debt charity as you get used to balancing a stretched budget.

Long-term Low Income – Debt problems are not always the result of a sudden change in circumstances and income levels.  For those in low paid jobs, struggling to live on an unsustainably low income while the cost of living is constantly rising may inadvertently fall into debt as they try to make ends meet.  Find out if you are entitled to any benefits or tax credits that may help.  It seems that an increase in working families using food banks and other types of help is a sad reality in the UK today.

Rising Cost of Living – A combination of stagnating wages and the continuously rising cost of living in recent years has seen an increasing proportion of workers able to cover less and less of their monthly outgoings with their monthly wage.  While things are beginning to ease in some sectors, this has left many families in the UK worse off than they were before the financial crisis and the resulting austerity measures.  Try to keep a spending diary for a month and look closely to see if there are any areas where you could reduce the amount you spend.