A new report from the Halifax’s Insurance division, Halifax Home Insurance, shows that many Scots are falling into debt because they are not careful enough of how they spend their money. An increasing number are balancing the books by an excessive use of their overdraft or turning to short term loans.
The last year or two has shown a substantial rise in basic household costs, particularly insurance, fuel and phone bills, and this has cut into the disposable incomes of many people.
Astonishingly, the research discovered that nearly 90% of people who were interviewed did not really know how much their expenses had changed over the last year and had not adjusted their spending habits. A third of those who were interviewed had had to turn to an overdraft to help pay for basic bills or take out a short term loan.
Despite the fact that the amount the average household had to pay went up by just over two hundred pounds last year, most people interviewed thought that it had increased only by between fifty and a hundred pounds.
50% of households had not even bothered to check exactly what their bills were.
The marketing chief executive at the Halifax, Paula Llewellyn, said that this level of carelessness meant that millions of Scots could be falling into debt without fully realising their predicament. She emphasised the importance for everybody to keep a close eye on what they were earning and spending.
A profile of the typical person falling into debt and seeking an instant cash loan to get themselves out of trouble was provided by the Scottish branch of Citizens Advice. The typical person in debt was somebody who was middle aged, single, had a job and was living in rented accommodation.
The usual reason for people to make a visit for advice at the Citizens Advice Bureaux was because of problems relating to credit card and instant cash loan debts.
Just over thirty percent of debts were due to utility bills, council tax and rent arrears alone.
Susan McPhee, chief executive at the Citizens Advice Scotland, said that while everybody had uniquely individual circumstances, the reason why most people had personal debt was because incomes were falling at the same time that costs were rising and people were unable to cope with the change.