How much debt would you consider to be “serious”? Surprisingly most Britons don’t consider themselves to be in real financial trouble until their personal debt exceeds £14K and that doesn’t even include the money they owe on their mortgages.
It’s an astounding figure when you think about it. It is more than a year’s salary for many who are living in Britain and yet there are a large number of people who think that until their debts reach this kind of level, they are in control of their finances.
It seems that most people are quite happy to get into a significant amount of debt in order to live the lifestyle that they choose, regardless of what the long-term implications are. That being said, our tolerance for debt is starting to drop, slowly but surely. Last year the majority of people didn’t consider their debt problems to be serious unless they were nearly £16,000. However, the fear of unemployment or ill health has led many to consider their financial planning.
Fear is forcing Britons to rethink their debt expectations
Having debt is not a problem, as long as you can afford to pay it back. However, the high number of job losses over the past few years has meant that many Britons are starting to think more seriously about how they would manage financially should they lose their source of income. Increasingly, people are taking serious action on cutting back on the amount they owe so that they can afford to maintain their lifestyles should they become ill or lose their job.
According to a report from Bright Grey, a mutual life and pensions company, people are starting to take control of their finances and change their expectations of what a tolerable amount of debt should be. For example, in 2010 West Midlands borrowers believed that serious debt problems started at around £17,118 whereas today that figure has dropped by £5,000 to a slightly more controllable £12,360. Whilst this figure is much more sensible, it is still a serious amount of money to owe.
Make do and mend is the new mantra for many
It’s not just the fear of job losses that is causing many Britons to rethink their expectations of what is a reasonable level of debt. The cost of living has risen significantly over the last couple of years, meaning that for increasing numbers of people, taking out more debt simply isn’t an option. Rising numbers of people are getting wise to the vicious cycle of consumerism as well. When they look back on all those material things that they have acquired with their debt, many ask the question, “was it really worth it?”
The problem for a large number of people is that, not so long ago, the banks were only too happy to lend large amounts of money. Credit was easily available in the form of store cards and hire purchase agreements, so we took the money and made the most of it. With today’s austerity measures and declining economy, it makes so much more sense to cut back on all those extra, unnecessary frivolities and make the most of the more important things in life.
Whilst our tolerance of debt has certainly decreased in recent years, as a nation the Brits still owe far more than is sensible or even necessary. Just think of what that extra £250 a month could buy if it wasn’t being spent to pay off old debts? It’s definitely time to start rethinking those finances.