Dealing with debt
The current economic climate has thrown many women into protection mode, whether they are currently at financial risk or not. Women are curbing their spending all around the world to protect their financial position and create a buffer of cash, just in case.
The urban credit creep
The inclusion of this debt section is in part due to the ongoing affects of the world economic situation. However, the more important reason for including this section in Pink Investments is due to the urban creep of credit from its once contained boundaries, into the daily lives of most women.
Given the availability of credit and the passionate consumer culture of the 21st century, it is hardly surprising that we are taking on more debt and at earlier ages than ever before. Thirty years ago, taking out a mortgage was something women were nervous about and took very seriously. Today the vast majority of women have mortgages secured against their homes and readily accept this as normal. Debt has become a matter of fact for women today.
There are all sorts of theories about why we spend money we do not have. Whatever the theories, it is a fact that overwhelming debt can have very damaging effects on us as women. It can lead to feelings of shame and depression.
There are many myths associated with debt
It is a myth that debt is always due to rash overspending and reckless behaviour. Loss of income, due to unavoidable situations such as the death of a partner, divorce, redundancy or sickness can spark a crisis. But often, it is as a result of too many bills arriving at the same time or a simple accumulation of smaller debts, that causes the problem.
Debt can creep up on us. We start with a few store cards, a couple of credit cards and some seemingly good idea 'Buy now Pay later' deals. When we add them all up, we are invariably stunned by the total debt we have accumulated.
Thirty years ago, it was much harder to get into this situation. Credit cards and 'Buy now Pay later' deals, were not part of everyday life for women. There were many less dangerous options available to get what you wanted on a drip feed system. These came without the high interest payments.
One of the major differences between then and now was, that you paid slowly before taking the goods home. Today we are encouraged to take it home now and pay later. Under the old system, the item was brand new with plenty of life left in it, when it was fully paid for and taken home. Today the item is old and on its way out by the time we have paid for it!
Alternative to credit card payments.
Most coutries had their own version of these alternative payment methods. For our older women in the UK they may remember with fond nostalgia, green shield stamps or the Co-op savings stamps, saved in books and exchanged against goods, once completed.
In Australia lay by and lay away were common all around the country. This system allowed you to select your items in the store and take them to the lay by counter. Typically you would pay a deposit and then pay off the balance over a number of weeks. When you made your final payment you received your goods.
These systems were readily available in the majority of stores and were an accepted way of securing what you wanted and paying for it, when you could afford it. Today the 'Buy now, Pay later' credit arrangements are available everywhere. These are very different. They are backed by finance companies and impose hefty interest penalties, if you fail to pay on time. They involve credit checks and of course offer you a credit limit way above the value of the item you originally intended to purchase. It is a huge lure to make you spend more than you bargained for. This scheme encourages more spending every time your balance reduces.
In the current economic climate, it may be a good time to revisit the in-store savings clubs and lay-by systems. Governments really wanting to get to grips with the credit epidemic could do well to give incentives to the stores offering these schemes.
If you have problem debts, ACT NOW.
Whatever the cause of your debts, it is vitally important that you do not avoid the situation. Many women get into serious problems because they leave it too long before contacting their creditors. Don't worry if it seems daunting at first. Read our debt resources and visit our learning centre and take the free online debt course. Then take it one step at a time. Follow our five steps to start the process.
Work out all the money you have coming in. You will then know just how much you have in total.
Work out all your regular outgoings (other than debts) Don't forget to include things that you only pay once or twice a year. Also ensure you add all the money you require to live on, you are entitled to keep your reasonable living expenses. Many women in debt start to do without the absolute basics, to try to get by. When you come to an arrangement about your debt you are entitled to have these taken into account.
Money left for your debts
Work out how much you have left to pay your debts, after taking into account all your other outgoings.
Your priority debts
Which debts are the most important to pay first? Very often they are not those creditors that contact you the most or try to hassle you the most. Your priority debts are the ones that your home is security for. Take a look at your credit cards after your priority debts. Start with the ones attracting the highest interest.
What's left after paying for priority debts?
Work out how much you have left after making arrangements to pay your priority debts.
Companies that charge for debt advice
You may come across companies who offer to sort out your debts, if you pay a fee. Be very careful to look at what the company is promising to do for you, before paying them any money. Some of these companies say they will get your creditors to write off part or all of your debts. Unless you have special circumstances, this is unlikely to happen. Some companies tell you that they will be able to get the creditors off your back. Free services can also do this for you. Some of these companies do offer good services, but get good free advice first.
Professional advice on dealing with your debts is always available free, from a number of government backed agencies.
Financial counselling services help people who are in financial difficulty. They are available around the world and provide free independent and confidential services. See our 'Where to get help' documents in our debt resources section.
We have also made available comprehensive resources for all you need to know about your legal rights and the free services available to you. For country specific template letters, free advice providers, downloads and more help in tackling debt, click through to our debt resource pages.
Remember, you could better spend the money you pay in fees, paying off your debts.