Tag Archives: job loss

Borrowing to cover job loss or ill health (debt danger sign #5)

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Mini Graphic 5As part of Debt Awareness Week we’re discussing the five danger signs to help you avoid them, or if you’ve tried to deal with your finances in this way, how to get help sooner.

One of the more unfortunate danger signs is using a debt to cover living costs following unemployment or ill health. Having a sudden drop in income will always be a huge blow but for some it can be worse than others.

Relying on credit to survive can seem like a lifeline but it can actually make things much worse.

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25 euphemisms for “You’ve been made redundant”

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A worker is made redundant

“We’re gonna need to go ahead and move you downstairs. We have some new people coming in, and we need all the space we can get…”

Recently UK unemployment reached its highest level for 17 years. The figures – 2.57m jobless – made for grim reading.

And this week we registered our alarm at redundancy figures released by the Office of National Statistics (see yesterday’s post on the subject).

In light of current events we’ve been following answers submitted by the public to “What are the most creative euphemisms for layoffs?” on the social network Quora. It’s made for blackly comic reading.

Given that one of the MoneyAware team was once made redundant due to “headcount realignment” (no joke) we thought we’d list 25 other euphemisms used to try to soften the blow of redundancy (a euphemism in itself when you think about it).

“Stating the bleeding obvious” would be more appropriate…

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Don’t lose your head when you lose your job

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losing your job

The Invisible Man was sacked for not showing up to work

You’ve been made redundant. You walk out of HR back towards your desk, grabbing a box so you can slowly and sadly empty your drawers and tidy your desk of your mementos and photos. Maybe, as a small act of revenge, you’ll nick some pens or a box of paperclips.

It’s desperately sad to be made redundant. Some react by bursting into tears, some by shouting and swearing, and some by quiet resignation. Others are upbeat, thinking that perhaps this is the break they needed, and they’ll find another job soon. But how are your finances going to cope?

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Our new redundancy debt help guide launched

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News of the World newspaper

Up to 200 News International employees had their worst fears realised last week when they were made redundant from the News of the World, with only three days’ notice.

But what about those people who lose their jobs without the cushion of a (reported) large pay-off, or the chance of redeployment elsewhere in an organisation? And what happens to their (previously manageable) debt? Who is there to help them?

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What you think causes personal debt might be wrong

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The causes of debt (click for larger)

The causes of debt (click for larger)

Take a look at the causes of debt graphic to accompany this post.

The main cause of personal debt is thought to be pretty simple: debtors are seduced by consumerism. They went wild in the aisles and now they’re paying the price. They were feckless, reckless and spendthrift, and now the bill has arrived. In essence, overspending is the main cause of debt.

Right? Wrong.

I recently scanned through some newspaper stories on debt, not to see the scale of the issue, but to see what was said in the website comments. I was interested to see what “the person on the street” felt about UK personal debt.

The responses were pretty standard, blaming external factors (it’s Labour’s fault; it’s the Conservatives’ fault), or in a few cases, blaming the banks and lax regulation. However, far and away the biggest blame was reserved for the debtors themselves.

“No one forces you to borrow”

Some example comments, from a newspaper website:

“It is your own fault if you have too much debt. No one forces people to borrow. It’s about time people took responsibility for themselves and grew up”

“Most people are in debt simply because they live in an “I want” society and not a “do I really need it” society”

“At the end of the day don’t borrow if you can’t afford to pay it back. Simple really…”

“If you do not want to be chased for money do not borrow money…”

“[Bankruptcies] encourage the feckless to run up huge bills, hoping that when they become unmanageable some soft judge will release them from their obligations”

“There are millions who have the ‘I want it and I want it now’ attitude and have absolutely no common sense or responsibility”

(Source: Daily Mail)

To be fair, a couple of these comments had been ‘downvoted’ by the rest of the community (in other words they weren’t the view of the majority), but these still give an idea of the perception of how people fall into debt.

At its most extreme it’s a perception that debtors buy plasma TVs, expensive clothes and video games consoles, racking up the bills until the cards are declined, then phoning up a debt help charity like StepChange and pleading poverty, in an effort to get the debt written off.

That’s the perception, but not the reality

Given we ask each of our clients their main reason for falling into debt – so we’re acutely aware of the reality – we thought it would be interesting to test how endemic the perception is and compare against our knowledge. We asked the excellent economics website eZonomics to poll their readers, to find out the general consensus.

They asked:

What do you think is the biggest cause of financial difficulties?

The results confirmed our theory. 49% of those polled said that the main cause of personal debt was overspending, while only 29% said that job loss and pay cuts were the culprits.

The reality of the situation is virtually an inverse of this. In 2010, 48% of our clients stated that a job loss or a pay cut was the main reason for their debt. In contrast overspending was only listed in 10% of cases.

The reality is that work issues are the main cause of personal debt in four times more cases than overspending. Alongside this, the perception of profligacy as the main cause of debt was five times higher than the reality.

The general public understates the actual reason for problem debt but also overstates the role extravagance takes.

Debt infographic

To visualise this difference we decided to design another of our successful infographics, which we present today: Do you know what causes bad debt. Take a look and share it with your friends via Twitter, Facebook or your favourite social bookmarking site. Blog about it and tell us in the comments below if you think it’s right or wrong.

We’re aware of some limitations of the data. The poll wasn’t scientific and the data we’ve collected isn’t independently verified. Our data also has a little bit of a bias; it’s collected from our clients not the general public.

However it still challenges the perception of debt and indicates that it’s less about being weak-willed and is more an unfortunate and accidental fact of life.

As I said at the start, what you think causes personal debt might be wrong.