Thursday, 19 February 2009

Confessions of a Shopaholic - how to handle your debt!

Confessions of a Shopaholic, now screening at cinemas nationwide.

The timing of this movie in the current climate leaves alot to be desired! It's hard sympathise for Rebecca, a spend-happy, romantic caught out by her passion for shopping. She holds 12 credit cards and racks up debts left right and centre.

The situation is so desperate that a Debt Collector is hired to recover the money owed.

Rather than ask for help at this point Rebecca spins a web of lies which only makes matters worse.

Okay, so we're talking about an entertaining chick flick, but how much of this now relates to real life and recession?

Did you know that there is a name to describe someone addicted to shopping? Oniomania.

Oniomania, as with most addictions tends to affect people with a compulsive, destructive nature.

Oniomania can lead to devastating debts.

Here, Mark Gardner, partner at Latimer Hinks Solicitors (scroll down linked the page for Mark's profile) provides some expert advice:

Sadly while this movie is meant to be a bit of fun/light-hearted the issues raised by it are all too relevant and painful today. Regrettably for too many people the ending is not happy but it does not have to be extremely painful. There will be pain and sacrifices to be made to get out of the problems.

Stop spending – easier said than done. Rebecca has clearly got a problem both financially and medically with her addiction. Does she have the will-power to stop? Only time will tell.

  1. Rebecca must determine her incomings and essential outgoings - rent/mortgage, gas, electricity, council tax, food, travel to a from work etc. Whilst this list does not include new shoes/handbags there should be a modest figure put in for contingencies. Hopefully there will be something left over which can be used to sort out the debts.
  2. The next step must be (and this can be the hardest) to ascertain how much is owed and to who? Honesty is essential as to underestimate or leave a debt out could ruin all the good plans. If in doubt, over-estimate the debts and under estimate the available cash.
  3. Next, with these two figures to hand what can be done and how do you move forward? One way to generate extra cash is to look at excessive items/purchases and sell them on sites such as ebay or the like to raise immediate cash. Hopefully a lump sum can be raised – however small to go into the pot.
  4. What is being paid by way of interest on store cards etc? Is there any mileage in moving balances to a card which charges no interest on balance transfers? This MUST NOT be used as a means of getting more credit. The original cards should be torn/cut up/destroyed! Look at loans etc and see if there are cheaper alternatives. Restraint and self control are going to be key here. There will be a big problem with “cold turkey” as Rebecca is weaned off her addiction.
  5. What about Rebecca setting herself a budget in cash each week? Once it has gone then that is it – no more temptations to spend in lunch hours etc. Why pay for expensive sandwiches – bring lunch to work and avoid the need to go out to the shops. Any overtime on offer or opportunity for a bonus? It is not all doom and gloom – cheaper alternatives to going out are to meet at home and cook food over a bottle of wine etc or a rented movie – or choose to eat out on "specials" nights or when there are 2 for 1 offers available (check out moneysavingexpert).

These are only suggestions but are not exhaustive. A full strategy needs to be thought out and stuck to in each individual case. What works for one may not work for another. One size definitely does not fit all! The sooner the problem is recognized and acknowledged the easier it is to resolve.

Finally if the problems are fairly severe and creditors are pushing there are always formal arrangements under the Insolvency Act to secure an orderly repayment. Initial insolvency advice is usually free from reputable qualified insolvency practitioners and the costs of any arrangement (aside from court fees) usually come out of the instalments. Hence an instalment may be asked for in advance.

Ultimately bankruptcy can provide the only way forward for some people. Specialist advice should be taken before that is embarked upon as there are repercussions with regards to homes, utilities and banks to name but a few. Partners can also be affected by bankruptcy.

Hopefully with will power and a long hard look at herself and her habits with the benefit of a job the Rebeccas of this world can sort their problems out and achieve a happier ending.


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