A recent study examining the financial habits of 2,000 British adults has unveiled a worrisome attitude towards debt. According to the research, the average Brit does not consider themselves in debt until their outstanding balances reach a staggering £45,000.
The survey revealed that 37 per cent of respondents admitted to resorting to various means to obtain items they could not afford, such as using credit cards, taking out loans, or dipping into their overdrafts. Surprisingly, four in 10 people confessed to relying on credit cards throughout the entire month, accumulating an average debt of at least £3,000. Additionally, a third of those surveyed admitted to spending a significant portion of each month in their overdrafts.
Interestingly, it appears that people only begin to panic about their financial situation when their debt reaches £45,454.26, prompting them to take action to rectify their circumstances.
The study found that the average person starts dipping into their overdraft before the mid-month mark, gradually approaching their £900 limit. Shockingly, 12 per cent of respondents admitted to living permanently in their overdrafts, seemingly unable to break free from the cycle of debt.
Furthermore, the research revealed that while 34 per cent of participants were willing to save diligently to afford desired items, an equal percentage showed no hesitation in borrowing money to purchase expensive items outright. Strikingly, 60 per cent of respondents saw no problem with financing a car, and many were comfortable with borrowing for home improvements, medical expenses, and furnishings.
Even more surprisingly, one-fifth of Brits demonstrated a lack of concern about taking out loans to settle other outstanding bills or debts from elsewhere.
Despite the substantial debt burden, a surprising 65 per cent of respondents claimed to be relatively relaxed about their financial situation. A significant majority believed that the era of saving for a long time to acquire desired items had come to an end. Additionally, over half of those surveyed considered it unusual for someone not to possess a credit card for emergency use during difficult times.
Interestingly, seven in 10 participants believed that society actively encourages the use of credit cards, store cards, and personal loans, as they aid in establishing a credit profile, which can be beneficial for housing applications and securing further loans.
However, the study also highlighted a lack of understanding regarding the classification of ‘good’ and ‘bad’ debts. A third of adults confessed to being uncertain about this distinction. Council tax debt, tax debt, and debts from utilities companies were identified as the worst kinds of debt to be in. In contrast, many respondents regarded mortgages, student loans, finance options, and bank loans as ‘good debts.’
Of the respondents, 30 per cent had experienced situations where they needed to take immediate action to repay their debts. Among these individuals, 40 per cent adopted a more frugal lifestyle to meet their financial obligations, while 23 per cent consolidated their debts with a loan for simplified repayment. Additionally, 19 per cent sought a second job, and 26 per cent diligently saved every penny they earned.
The study concludes that these findings shed light on the pressing issue of debt management, prompting a need for better financial education and awareness among the public. Understanding the implications of debt and distinguishing between ‘good’ and ‘bad’ debts is crucial to maintain financial stability and avert potential crises.
