Don't act like you're not in debt

Anyone can find themselves in debt, no matter what they earn.

You’re a high flying executive on £100k+ per year, flying down the motorway in your company BMW. You’re heading home to your lovely four bedroom house in the country.

You get a call from work saying a government contract that you’ve been working on has suddenly, shockingly dried up. You realise that the department that you head up at work is now under threat.

When you get home an email arrives, redundancy is on the cards unless the company can drum up another buyer.

You’ve pumped all your spare cash into paying off the mortgage and making provision for retirement, except the mortgage will take another eight years to pay off and you don’t retire for another 12.

And you owe £45,000 on a loan and credit cards.

And the BMW would have to go back to the company so you’ll need a new car.

You’ve got £15,000 savings.

But your daughter wants to get married next year.

She wants to get married in Bermuda.

You could sell the house, there is plenty of equity (would have been more if you hadn’t have re-mortgaged to get the pool done). But without a job, would you get another mortgage? That would mean massively downsizing - what would the other half think?

So now you freeze, wait, hope and think. And maybe get another loan while you still can…

Debt can affect anyone

CCCS is a debt charity; the words debt and charity together often give people the mental image of poverty and an almost Dickensian view of debt.

This is far from the truth; debt problems can affect everyone from the lowest earner right up to those with high six-figure executive salaries. The difference is all about scale.

Someone earning £10k per year and owing £5k in credit card debts may find that they are overcommitted, while someone earning £100k per year owing £50k on credit cards and loans might feel in a superior position. In reality their positions are almost exactly the same.

The person earning £100k might be easily able to manage their commitments at present, but what if circumstances changed?

With the current state of the economy, lots of jobs are under threat. We have blogged before about how people get into debt. It’s usually the result of a life change such as losing a job, or a relationship break up.

If you lost your job, how long would you or could you last making your repayments to your creditors and maintaining living expenses before you began to default and entered the creditor collection process?

For someone earning £10k or someone earning £100k, the time frame may be exactly the same.

Get help

When people lose their jobs, it’s often a first reaction to utilise yet more credit to maintain their lifestyle until they find other work. This is usually the start of a downward debt spiral.

Debts that might not be a problem while you are earning a big salary will rapidly become a very big problem if your earnings disappear. And taking on more debt to cover your contractual payments will mean that trouble is just around the corner.

The person on the larger salary often has a lifestyle to maintain that even when they become unemployed they wish to continue. This will only aggravate the situation further.

The downward debt spiral of a high earner can often be more drastic and devastating than someone on a low salary who has fewer outgoings.

CCCS offers free and impartial advice to those on low wages and to those with salaries that are high by any standards.

If you’re carrying credit card and loan debts and you’re on a high salary with a lifestyle to match, you might want to consider how you can best reduce your exposure to credit. It might not seem like a problem compared to your earnings and/or savings, but it only takes a slight twist of fate that will leave you needing our advice. We’re here to help but we’d rather you didn’t need to come to us.

If you are in a situation where you feel overwhelmed by debt you could try our online advice tool Debt Remedy. It’s designed to offer debt advice for all types of situations.