THE BAILLIE GIFFORD ESSAY COMPETITION
The
Baillie Gifford Essay Competition is a unique competition aimed at helping
students understand more about managing their finances. Students were challenged
to write an appropriate discursive essay on the following:
Why do you think so many people run up excessive debts and why do you think it has become socially acceptable to be in debt? What should be done to address this issue?
Sarah O Hare S2B shown left entered and was a successful runner-up winning a £50 book token
Background
Debt has become a huge problem in today’s world, evolving from the misuse of credit cards and the ever rising costs of mortgages and loans. Debt and the control of debt have now become an issue which different political parties involve in their election agenda’s. People now accept debt as part of everyday life but they do not want it to affect their quality of everyday life. Debt is easy to get into but difficult to get out of.
Sarah's Essay
Britain's personal debt is increasing by £1 million every 4 minutes! This staggering statistic shows us just how bad the problem of debt is in the UK alone. There are many reasons for the amount of people in debt increasing and there are many contributing factors which cause the debt and lead to a lot of hardship for families and businesses. The changes in the economy and business environment over the last twenty years have extenuated this suffering.
Recently the Housing Executive and other Housing Associations have not been building properties for rental so the only way that people can buy a house is by taking out a mortgage. Mortgage loans have risen by a massive 124% in just five years so it is very difficult for people to repay them. Some take out mortgages at a rate which stretches their budget so when the rate increases the person goes further into debt. The number of repossessions in Britain has increased by over a ⅓ in the last 10 years due to increasing mortgage rates and increasing unemployment and business closures. This shows that buying a house lands people in a mountain of debt.
Banks and financial institutions are also to blame for the increase in debt due to the rise in credit card users. The temptation of ‘buy now pay later’ has spun out of control recently. Credit sales in shops and department stores where products are purchased and paid back with interest added to the bill at the end of each month is another example of the traps that people fall into.
Over the years people have had to avail of all or some of these methods of payments because people nowadays are more interested in ‘Keeping up with the ‘Jones’’ and becoming socially superior to others than living within their means. Flash cars, expensive designer clothes, large houses and luxurious holidays are now a part of everyday life even if they can’t be afforded. Many people’s pride is hurt if they cannot match or surpass what their neighbours, friends or family members have. With the average person in the UK spending around £813 at Christmas, there are clearly many social pressures to get into debt.
‘One in four Britons shop to relieve stress despite rising personal debts.’ All this shopping adds to a trend for personal debt that keeps on rising. This statistic and the others mentioned above are results that come from people not being able to cope with debt and the stress associated with it.
It is now socially acceptable to run up excessive debts and the majority of people have debt of one type or another. The way people have got into this fragile position may have had other factors that made the situation worse. 52% of debt is caused by divorce and separation, 18% is caused by bereavement and 15% of debt is caused by ill health. 10% of debt is caused by redundancy and 5% is caused by disability.
Many people may argue that it is ok to get into debt nowadays as there are many debt management companies; these were established in an attempt to solve some of the problems associated with debt such as alcoholism, suicide and drug addictions and help people sort out their debts. Some feel they will sort out all your debt problems but new research suggests that the fees charged by these firms almost invariably means that people end up paying more.
People have to take out student loans to complete their education. The average student debts are around £10,000. This means a person is in debt from trying to achieve a good education.
People need to be taught from a young age how to manage debt effectively. It is not about how much people owe but about how much they owe relative to their income. Personal debt must be dealt with by better education about saving money and how to spend money wisely. More detailed checks must be made out by the Banks and financial institutions to make sure that their customers are capable of paying them even if interest rates or their circumstances change.
Debt can lead to a lot of hardship but it is only a problem for people who do not seek help and advice to get out of it.
