Matching income to spend still the way to stay solvent
Wilkins Micawber had the principles of personal debt all sorted out. "Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness," he says in Charles Dickens' novel David Copperfield. But he also warns: "Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
None of this, to put it into the modern idiom, is rocket science. But just knowing the principles, as Mr Micawber so clearly does, isn't always enough to stave off financial catastrophe. The great literary comic hero's other dictum, that "something will turn up", was his answer to constant debt and looming penury. The fact that it worked for him, of course – by the end of the novel he is a bank manager in Australia – may tell us something about bankers. But as a monetary principle by which to live life today, hoping that "something will turn up" is not to be relied upon.
As a report just out reveals, more than 50 adults a day in the South West sank into insolvency over the past 12 months, giving the region a ratio of 31 personal bankrupts per 10,000 adults. That is well up on the national ratio of 26 in every 10,000. The difference between falling seriously into debt today and in Victorian times when Mr Micawber was trying to make ends meet can be summed up in one word – shame. The shame of debt in Dickens' day could mean being dragged away in chains to the debtors prison. Today it is more likely to mean applying for a Debt Relief Order, sometimes known as "bankruptcy light". That might seem like an easy way out. But it is not. And if there is, quite properly, far less shame in falling into debt these days, with soaring costs in energy bills, council tax, water bills and the weekly shop, it is still no picnic to find your options severely limited and your horizons closed off by unemployment or low pay and commitments that just cannot be met.
The best advice for those struggling on the precipice of personal insolvency is to get advice quickly. It is out there. And for those who can see it looming, curtailing their spending on the non-essentials has got to be the priority, however hard it is to refuse children the latest trainers or deny yourself that longed-for holiday. In that regard, Mr Micawber's advice to match income to expenditure is as important today as it ever was.
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