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How to Break the Cycle of Debt

Posted 15 November 2015

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Do you seem to be going round and round with your debts? Read on to find out how to break this cycle and recognise the warning signs.

Getting out of debt can seem easier said than done. You may have tried several times to make a meaningful financial change and found that, for one reason or another, it just hasn’t stuck. Well, no matter how dire your situation may feel at the moment, there’s always a way out of a financial quandary. But something has to change. So let’s have a look at how people get into the debt cycle and how you can break the cycle and gain financial freedom.

5 steps into the cycle of debt

So how does the cycle of debt actually work and why is it so hard to break free from? Let’s have a look at the five steps that lead into the cycle of debt.

1. The cycle often starts because you experience a change in circumstances (like bereavement or redundancy) that leaves you short of cash

2. At some point you realise that the money isn’t going to stretch and you can’t make it through the week or the month

3. You may be tempted by adverts for credit and think that this would be the easiest, or in some cases the only, way to tide you over financially

4. Whilst you have the intention of paying it all back, unless your situation actually changes, you may find that you’re relying on credit and can never catch up with what you’ve borrowed

5. Eventually all the money from that first line of credit will be spent, and then another line of credit is needed to pay the first one off, plus the interest that you owe on the first line.

 

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The Trigger for debt

There are different reasons for people needing to use credit in the first instance. You could lose your job, have your hours cut, have a child, or experience a change in circumstances with your family or health that means that you cannot work. Of course, sometimes debt starts just because of general budgeting issues rather than one particular reason.

It’s important to identify what your trigger is – by this we mean the circumstances that first got you into debt. It may be something that was completely within your control, or circumstances may have forced you into borrowing. Understanding what led you to borrow is an important part of breaking the debt cycle.

Whatever the reason, it’s not a good idea to continue down a path of relying on credit for day-to-day living, as you’ll end up paying more back in interest and the debt could spiral out of control.

Breaking the Cycle

The good news is that there is so much help out there. No matter how long you’ve been in the cycle of debt you can get out of it.

If you think that your problems were caused because you didn’t budget well and that you could get back on top of your debts with by planning your finances better – great! Have a look at our articles on how to cut down on unnecessary spending and stop leaking money.

However, if your money problems are caused by a change in circumstance that you can’t help – and you don’t see your situation changing – then it’s really important to reach out and make sure that you get the support and advice that you need. The Money Advice Service has lots of free advice about what you can do, and if you want to have a chat, our trained debt advisors are ready and waiting. They’ll take you through the different debt solutions that could transform your situation and help you break the cycle of debt.

 

 

 

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.