Debt has become a huge issue in the UK, cementing itself in modern society. According to the Consumer Credit Counselling Service (CCCS), more UK residents are borrowing money earlier in their lives and are struggling to repay it until later in life. Over the past three years, the CCCS has handled 15 percent more requests for debt advice from people over age 60. To prevent themselves from ending up in this situation, younger generations are taking drastic measures to repay their debt.
Regardless of your age, debt-related issues can affect all aspects of life. When debt becomes unmanageable, family life, relationships, and even physical and mental health can be affected. Debt often begins during the college years, taking the form of student loans and credit card balances. After graduation, new working professionals typically do not earn enough to repay these in full. In addition, they accumulate more debt like car payments, furnishings, and living expenses when striking out on their own.
Eventually, most workers establish themselves and earn enough to cover daily expenses. However, they may still not be able to repay existing debts in full. Employment benefits often include a pension or other retirement fund, with workers and employers contributing money to the account. As this balance grows, a worker in debt may begin considering using all or a portion of the funds to repay debts. The money is intended to be withdrawn during the retirement years but desperate times often call for desperate measures.[needhelp01]
Many people do not realize how financially strapped they will be during retirement. They come to this realization much later in life, forcing them to invest more money each year. Experts recommend that people begin saving for retirement in their early 20s and continue until they actually retire, creating a large cushion of savings that allows them to enjoy their golden years rather than worrying about money late in life.
Using accumulated retirement funds to repay debt during the working years is never a smart move. However, when faced with the choice of repaying debt or contributing money toward a retirement account, some experts recommend paying down debts first. This way, high-interest debt balances are repaid, preventing debts from increasing. Once debts are repaid, there will be more money available to fund retirement.
People who are used to contributing extra income toward debt will not miss this money when it is subsequently invested in a retirement fund. Making regular contributions to retirement accounts allows consumers to steadily build retirement savings once they become debt-free. They should focus on living within their means and saving for the future so they can exist without debt.
Another benefit of repaying debts earlier in life is the ability to avoid facing debt during retirement years. Pensioners typically live on restricted incomes and if they are burdened with debt, life may be quite a struggle. By using disposable income to repay debt during the early years and then contributing the extra cash to retirement funds, UK residents will live more comfortably later in life.