Spotting the signs of problem debt

This statistic was taken from MoneyHelper research around problem debt, and more specifically about spotting the signs of problem debt.

With this in mind, our money expert Andy Webb sat down with our debt expert Caroline Hamilton to look at the research, and share some of the ways you can help yourself and your friends and family.

Andy Webb: So why talk money worries and why specifically debt?

Caroline Hamilton: Well, as a nation we’re just not great about talking about money. It’s still very much a taboo subject. In fact, our research shows nearly half of us keep money secrets from our partners. So, it’s not hard to understand that when we’re talking about money difficulties people go to even greater lengths to conceal that.

At this point in time, one in six UK adults are either feeling overwhelmed by the debt that they have or are struggling to make payments and many of those will actually be suffering in silence. It’s a shame because there is so much help available out there. We really feel the need to get the conversation started so we can help these people that need help. 

AW: And these one in six people, that debt could easily become crisis debt. Can you explain what the difference is between having some debts, which could even be quite healthy like a mortgage, or student loan, and debts that can potentially cause problems and cause crisis debt?

CH: There are times when we’re all going to want borrow money, you mentioned a mortgage and a lot of people do borrow to make a big purchase like that.

What tends to happen when people fall into crisis debt is it’s normally been triggered by something that upsets the balance of their finances. They’ve maybe had a life event, like redundancy, or a period of illness, which means their income has gone down, or their spending has gone up.

In that situation is people tend to turn to credit for help and borrowing can spiral out of control. Over time that can lead to real difficulties in making payments, struggling to keep up and going without essentials, like food, in order to pay debts, or borrowing more to keep the repayments going.  

AW: And that one in six, that’s a huge number of people who are at risk of this happening to them, but the whole point of this research is we don’t necessarily know that. People won’t talk about it and this could be going on to someone you know. One in six means there’s a good chance you do know someone who’s is potentially at risk of having real problems because of debts. 

CH: Yes, and the real shame is people who do come forward to seek advice – when people have been juggling for a while and they hit a crisis point and come forward for advice – what they all tell us is they really wish they had done it sooner.

Again, our research showed that when we spoke to friends and family members of people that were struggling with debts, they told us they had an inkling something was wrong, but they just didn’t know how to start the conversation.

AW: I guess that’s one of the really interesting things about this is we’re talking about the signs of debt and surprisingly this sort of research has not been done before. So, what are these signs?

CH: So, the signs of a debt problem, or someone worrying about debt, can be much the same as someone worrying about anything. They might seem anxious, they might seem worried, depressed, withdrawn, they might be having trouble sleeping, you might notice differences in their weight or appetite. Putting on weight or eating less is a common sign of stress.

But there are some symptoms that might point towards that being a money situation. For instance, if they’ve been in debt in the past, debt problems can reoccur.

If they’ve had a life event that means their income might have gone down. We talked about redundancy, or being ill, or losing a partner, all of these things will upset a households’ finances. 

Other examples might be, you simply think someone is living beyond their means. If they’re living a lifestyle and you just don’t know how they’re able to sustain it, it could be that they’re storing up a problem for the future.

You might notice that someone changes their spending habits. So, if someone is suddenly unable to do the things that they normally would, or they seem to be spending a lot less than they normally would that might indicate that there available income is not stretching as far as it needs to. 

AW: And I guess the important thing here is these signs don’t necessarily mean that someone has got debt or even crisis debt, but it’s just little things you can look out for and combinations of them and it’s asking that question.

CH: That’s right. Because we all do some of these things leading up to payday or if we’re saving for something, or if we’re just a little bit short because we’ve had to stump up something for an unexpected cost.

What I suppose this research says is if you’re already worried about somebody, if there’s already an inkling something is wrong, these might just be the things you can use to position the conversation appropriately and bring up the subject of money.

AW: That’s the thing isn’t it, these are things that are probably hidden that people probably aren’t going to be necessarily open about it. That’s why we’re asking people to look out for these signs in friends and family, but there are a lot of reasons people might not be talking about it in the first place. What are the kind of things people who are going through problem debt might be going through, which might manifest itself in these symptoms?

CH: One of the things that came through the research quite strongly was embarrassment. If we’re not a nation that likes to talk about money, we’re even less likely to talk about it when things are going wrong.

One of the reasons people might not feel the need to seek help early is we’re all inherently optimistic. So, we all hope something will turn up, that things will improve. Sometimes there’s pressure to carry on as normal, pressure from friends and family to keep up with a lifestyle, or a spending pattern, even if something might have changed to make that unaffordable.  

Another reason people don’t come forward for help is they simply don’t know that help is out there. That’s a real shame because there is a lot of good quality debt advice available and debt advisors, yes they’ll help people when there’s a crisis, but they actually want to speak to people sooner. They would rather people come and speak to them at the first sign of a problem.

AW: That’s the key thing isn’t it. If you leave it too late, and you talk about debt snowballing and getting out of control, the key here is to get in early and get that help as soon as you can.

CH: Yes. Though there are people that come for advice once a crisis has hit and there’s always something a debt advisor can do to alleviate the problem, to help re-plan, or to try and get you back on track before you get into a terrible situation.

AW: And for people who don’t know about debt advice, it’s freely available, you don’t have to pay for it do you?

CH: That’s right. And the debt advice is available in a number of different ways. So, you can get high-quality debt advice by going into see someone face-to-face, there are specialist debt advisors that can help you over the phone. There are actually some really good interactive online tools that you can use to get the help online. 

Details of all of these are available on the MoneyHelper website. We’ve got a fabulous page on where to get free debt advice, which will help you find a debt advice service that’s right for you – and all of the services listed on there are free. 

AW: An interesting statistic about when people do get debt advice is how effective it is quite quickly. I was quite surprised how soon the problems start to be resolved.

CH: This is the thing. What we do know from people who seek debt advice is that most of them tell us they wish they had done it sooner. They also tell us that things start to feel instantly better. So, that stress and worry can lift almost immediately. They start sleeping better and actually, within three months of people having sort advice, maybe two-thirds of them have either got a good plan in place to pay it down, or they’ve entered into a debt solution, which means they don’t have to repay anything at all.

AW: It’s not just about fixing the finances, it’s the idea that people are sleeping better, their relationships are better, so if they’re talking about money at least they’re not arguing about it as much.

CH: Yes, they’ve got the head space to perform their work and that can reach into all areas of life, so getting it solved means that everything starts to feel better.

AW: So going back to these signs and symptoms, say you’ve spotted some of them in a friend or family member, what can you do to help them?

CH: Don’t be afraid to have the conversation. If you go at it gently and you ask the right questions, just encourage that person to open up. In fact, another thing that came through the research was that when the friend or family member had been through that themselves, they were able to bring in their own experiences, which helped a lot.  

I think the important thing to highlight is there is always light at the end of the tunnel. There’s always something that can be done to solve a debt problem.

It can encourage them to get help, because, like you say, there are a lot of services out there and they are available on the MoneyHelper website.

And even if it hasn’t reached the stage where debt advice is needed, there are some useful tools on the website, which helps you plan with the money you have so you can make best use of every penny – and hopefully that’s all that’s needed.

AW: We say one in six people are at risk of crisis debt, and it could be anyone, but are there certain groups which are more at risk of debt becoming a real problem?

CH: I think you’re right to say debt could affect anyone because any one of us could end up in a situation where our income reduces through no fault of our own. But our research shows if you’re living in rented accommodation you’re more likely to fall into problem debt. Larger families are more likely to be struggling with financial difficulties, single parents as well and younger people. People between the ages of 25 and 34 are also particularly at risk of falling into problem debt.

AW: So, it could be anyone, but those groups are maybe more likely to display those symptoms, those signs of debt causing a problem and, I’m not saying have an intervention, but have a conversation. Just chat to them, ask them if they’re alright, what’s going on and offer that opportunity to help.  

CH: Let them know that help is available, let them know that debt advisors are happy to speak to people sooner, it doesn’t have to be a crisis to warrant their help and just give them the encouragement they might need to recognise the problem themselves.

What we know about people when they’re in financial difficulties, they struggle on for as long as they can and that becomes a way of life. Sometimes just having somebody else point that out can make all the difference.

AW: And this is not just about debt. This is about any kind of money worries, any kind of anxiety caused by your finances, because some people very easily can get worried about their financial situation, but have zero debts, have no worries, not be in the one in six at risk of crisis debt, but there’s still stuff that happens to everyone, where they’re concerned about the state of their finances. Are there certain simple things people can do to get their house in order.

CH: Yes. Get it written down. Find out where the money is going and at least that will give you some kind of idea where the pinch points are.

We’ve got an easy to use budget planner on the MoneyHelper website that can help with that.

Other tricks and tools, like keeping a spending diary if you’re not sure where money is going, checking your bank balance every day has been proven to help people track and make money last from one payday to the next.

And talk about it. Like we said earlier, lots of people keep secrets from their partner. If you’re just honest about money with the people around you then it just makes having those conversations easier.

AW: And we talk about the friends and family who want to keep doing things, spending money. If you can’t afford it, if you don’t have that money, I know it’s difficult to say no, but just say no. Say that you can’t afford it, but be honest why. Say, I can’t afford it because I’m saving up for this, or I’m a bit short this month.

CH: Well actually, I had a friend of mine say something to me in quite a nice way just a couple of weeks ago. She came out with me and she said I’m on a bit of a budget tonight, I’m going to be drinking half lagers, if you want to join me for a half lager, I’ll buy the first round, but I’m not buying Prosecco. So it can be done without being antisocial.