How to live on credit - Solution to the debt problem
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Posted On :
Jun-30-2010
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Article Word Count :
532
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Are you regularly running out of cash before the end of the month? Over 5 million households are using credit cards to pay for general bills and necessities every month in the U.K.
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The Facts
Are you regularly running out of cash before the end of the month? Over 5 million households are using credit cards to pay for general bills and necessities every month in the U.K.
Despite recent reports of a growing economy, average family incomes are tight. Less working hours available, pay cuts and the rising cost of living have stretched family budgets to the absolute limit.
Worryingly, more than 5 million homeowners are now using credit cards to pay at least one household bill each month according to research by moneysupermarket.com.
The problem might be eased if minimum wage was to rise, but that does not look likely due to the amount of national debt at the moment.
Private businesses have just come through the worst recession for years and surviving companies are not going to want to pay their staff more or employ any more people than absolutely necessary as a vast majority made a loss last year, or at the least experienced a slash in profit.
In the public sector, the government’s six billion pound cost-cutting plan could result in up to 750,000 redundancies, meaning a huge financial blow for thousands of families.
How The Cycle Starts
With many creditors increasing minimum repayments, people are getting into a downward spiral of debt that they cannot afford to pay.
This cycle begins when necessities are paid for using a credit card, which then has to be paid off using next month’s wage. Then when the next month comes, there isn’t enough cash to pay the necessities, so the credit card needs to be used again. This cycle continues month after month and is very hard to get out of.
If this situation is not stopped, and the full amount is not cleared as soon as the bill is received, debts continue to grow and monthly minimum payments continue to increase.
Solution To The Debt Problem
In general the only way stop this vicious cycle of using credit, incurring interest charges then spending months or even years paying it back, is by using a debt management solution.
There are two main debt management solutions to consider – a debt management plan (DMP) and an individual voluntary arrangement (IVA).
The best solution to use will very much depend on personal financial circumstances. However, the key behind both is that they successfully reduce monthly debt payments to an amount which is manageable based on each individual’s income and expenditure.
Once debt payments are reduced, there is no longer any need to supplement income with credit spending as all reasonable household living expenses can be paid out of monies saved on what you would have usually paid to your creditors.
The only way to resolve this problem is either to increase your income or reduce expenditure. In reality, most families are unable to do either, as pay rises are unlikely in the near future and the cost of living is constantly rising.
For this reason, considering a debt management solution is the best thing to do to stop a reliance on credit and fast-track yourself to solvency.
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Article Source :
http://www.articleseen.com/Article_How to live on credit - Solution to the debt problem_23925.aspx
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Author Resource :
Sterling Green PLC, based in the heart of Manchester City Centre, is a financial management company and as such helps people who are experiencing financial difficulties. Sterling Green experts help with debt management issues, debt consolidation and debt settlement.
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Keywords :
debt advice, debt management, debt consolidation, debt settlement,
Category :
Finance
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Finance
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