Trouble on the cards as debt for many spirals out of control

Whatever was left was mostly spent on groceries, with a little for the savings bank, a small pot for DIY jobs, and maybe enough surplus for a treat like a day out to the seaside now and then.

Unsophisticated it may have been, but underlying the old jam jar principle was the idea that bills were budgeted for and paid promptly, no debt was incurred, and when all pots were empty, you made do with whatever tinned or dried food was in the larder to eke things out until pay day. You certainly didn't have a night out, and borrowing was avoided like the plague.

The last couple of generations have lived through a consumer revolution, with buying "on the never never" ever more acceptable, evolving into a lifestyle for many that has been fuelled by credit. An age of "never had it so good" felt as though it would last for ever, but, inevitably, the bubble burst.

According to new research carried out for the insolvency trade body, R3, more than four in every 10 adults in Britain struggle each month to make it to pay day.

Against the backdrop of personal debt of 1.46 trillion and levels of personal insolvency that have increased by 350 per cent in a decade, experts say it's worrying that so many people are struggling.

The main causes are credit cards payments, spending on going out or non-essential items, and paying off bank loans, mortgage repayments and big ticket purchases.

R3's president Steven Law said: "Our addiction to credit cards is still out of control, despite recession and a tightening up of lending criteria.

"There needs to be a cultural shift in consumer attitude to debt. For too long we have got used to the idea that this is money we are entitled to. Using a credit card is just delaying the inevitable day of payback."

There's a lot to be said for the old philosophy, "If you can't afford it, don't buy it", says insolvency practitioner and member of R3 Robert Brown of Keeble Hawson in Leeds.

"If an item is absolutely essential, then look very carefully at the interest on the card and how long you think it will take you to pay it off. There's one new card with an APR of 30 per cent.

"If you ran up a bill of 2,000 on that and didn't pay it back

immediately, you could end up paying a lot more than the initial

purchase cost.

"Many of the people we see are juggling debts, and have only been paying back the minimum amount on cards. They are not earning enough to pay their bills, and may be in negative equity on their home, having borrowed up to its full value.

"They are driven to the edge, and for some the recommended route is to filefor bankruptcy.

"One way of trying to avoid getting into this sort of state is either not to have credit cards, or if you must use them, pay off as much as you can each month.

"When we analyse the outgoings people consider essential, many still feel they must have a foreign holiday. But getting out of financial difficulty is about cutting your cloth according to your means, and what's wrong with a break in this country, days out, or even no holiday, in order to help get your finances on a better footing?

"Other outgoings that people could cut down include smoking. There are ways to economise, but the main thing to do, if you can, is to keep paying your mortgage or rent."

The Consumer Credit Counselling Service says typical clients have 11 different creditors and debts averaging 24,300 excluding their mortgage.

Graham O'Malley, of the Citizens' Advice Bureau money advice team in Leeds, says many clients who seek help with financial problems are not feckless with money but have suffered unemployment or marital breakdown.

"Demand for our service is huge, with nine advisers kept booked up all week. People often say they know what the interest rates are on their cards, but they are not savvy about how much that means they'll pay over time if they don't clear the card quickly.

"One of the things we emphasise is the need to plan and budget and stay within that budget.

"An important thing parents can do is to teach financial awareness to their children.

"It really has to be on the agenda for every family, so as to steer people away from bad habits."