Poor financial management and debt
Poor financial management happens when credit facilities are used to pay for items that an individual cannot afford out of their income.
Credit cards, personal loans, store cards, catalogues and overdrafts are all ways in which people can get money to pay for items they couldn’t usually afford. Poor financial management often involves use of credit to pay for luxuries or credit could be used by low-income households to pay for their basic cost of living e.g. food, rent, mortgage and council tax.
A benefits check-up may help minimise the need for debt if people are finding it hard to pay for basic living costs without using credit. Once people begin to use credit to feed their spending it is hard to escape from the debt trap. Handing over a bit of plastic in the form of a credit card doesn’t give the same feeling as handing over hard earned cash.
Using the card helps them disassociate from purchasing the goods. According to the National Savings and Investments survey 39% Brits overspent on their debit cards on day-to-day purchases and blamed it on the fact that they felt they weren’t spending when using their debit cards.
It isn’t until they receive their statement at the end of the month that they realise the consequences. For many the vicious circle of paying the minimum payment each month is a demoralising situation, especially when it is swallowed by interest and late charges.
The cycle continues until the debt becomes so unmanageable that they realise it can’t continue.
If this sounds familiar please contact a PayPlan adviser who will be able to help you. We can advise on all levels of debt and will not ask you to justify the reasons for your debt.
To find out more about Reasons for debt click here