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Household debt, Credit card debt, unsecured loan and other types of personal debt are rising fast.

  • Bank of England to force banks to create buffers due to rapid rise in personal debt on credit cards and car finance schemes.

  • Banks to set aside £11.4b extra capital to protect the financial system.

  • The average household had unsecured debts amounting to £13,200 at the end of 2016, just below the £13,300 level at the end of 2008, on the eve of the credit crunch.

Inflation, Interest Rate and you; Why we need to get a grip on our personal finances now.

The various measures taken by the Bank of England are acknowledgement of the level of personal and household debt in the country.

Household debt level in Britain is frightening yet nearly half of today’s workers are living paycheck-to-paycheck, with no financial cushion whatsoever, and a big part of the reason boils down to living beyond our means. Although this may sounds harsh, as certain factors like cost of living and imbalance in the rate of inflation and wages meant even for the most frugal, it is difficult to avoid debt.


Spiraling debt can have a devastating effect and particularly difficult to get out of the circle, as people tend to pay down debt by racking up another debt. However, there are signs to watch out for before debt becomes uncontrollable, with these signs, individuals may be able to mitigate the scale of debt by spotting the signs and taking measures as appropriate


Credit score criteria

  • Payment history- 35%

  • Amount owed- 30%

  • Length of credit- 15%

  • New Credit- 10%

  • Types of Credit- 10%

There are five major factors that contribute to credit worthiness, each with different weighting, however the two biggest are your payment history, which indicates  your ability to pay your bills on time or how you have managed past or existing debt, repayment wise, and the amount owed, which indicates the level of debt. These two factors combined make up 65% of credit score criteria.

A poor score in these areas either indicates individual is already in debt or rapidly approaching debt, as these indicates the individual is unable to pay back existing debt or owed too much in proportion of their income.



Income is a function of profession, and as such have a very wide spectrum, while there may be less debt pressure at the higher end of the scale, the middle and lower tier definitely have tendencies to be in debt for various reasons.

Housing is the largest monthly expense, with housing shortage and high demand, combined with the need to live in a “comfortable” and conveniently located to work, schools and transport, there is inevitable pressure on house price, mortgage and rent, thus it is easy to fall into a trap where you’re overspending on housing, and thus putting finances under pressure.

According to Learnvest, monthly income ideally should be divided into 50/20/30 ratio, which are Fixed cost/Financial goal/flexible spending.

The fixed costs are bills and expenses that don’t vary much from month to month, like rent or mortgage payments, utilities and car payments, while flexible spending are day-to-day expenses that can vary from month to month, like eating out, groceries, shopping, hobbies, entertainment, or gas while the remaining 20% is advised to be put away for important future expenditure or investment.

While individual circumstances vary and may depend on family size and type, whether divorced, single or married, it is however clear that monthly expenses beyond income is an indication of debt.

Taking measure to managing monthly income to ensure expenditure does not exceed income is an important aspect of avoiding or managing debt, not only will you avoid borrowing on a paycheck to paycheck, the savings after expenses can create a safeguard against sudden demand for large one time expenditure.

Mitigating against escalating debt may be difficult for various reasons, some may be out debtor’s control, however taking measures to avoid the situation building up is important. 

Saving up when the times are good and living within one’s means is vital, and when in debt, confronting it by taking a definite actions to addressing will help a great deal.




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