The destructive force that ruins more relationships than Brexit

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There's a powerfully destructive force that has destroyed more friendships and family relationships than even Brexit can manage. A new study has revealed this money issue has destroyed 12.6 million relationships across the UK.

The force in question is unpaid IOUs. Research from Paym found that 29% of UK adults admit they had fallen out with someone over an unpaid debt of up to £100.

Some 14% of people have fallen out with family members, and 15% have ended up cutting ties with a friend entirely. Almost one in ten have admitted picking a fight with a partner about not paying money back. And nearly one in three people (32%) even say they have waited more than a year to be repaid.

The study also found that the Welsh in particular are most likely to have fallen out with family (19%) and a partner (17%) over money, whereas Scottish (9%) people are most forgiving for forgotten IOUs.

And while we may be furious with someone for not paying us back, the study showed there's a good chance we have been just as guilty at some point. Almost two in five people admitted they don't always pay friends back - and one in ten say they have avoided repaying a debt to a family member deliberately.

What can you do?

Unsurprisingly Craig Tillotson, Executive Chairman of Paym, thinks the UK's mobile payment service is the answer. He says you can register, and then all people need in order to pay you back is your mobile number. That means you don't need to see them to retrieve cash - or arrange a complicated bank transfer.

However, this will not help in every situation. Dr. Simon Moore, who led the team of psychologists at Innovation Bubble for the study, says that if you decide to lend the money, you need to decide up-front how the money is going to be repaid - and when. Moore says this will ensure that neither party ends up feeling let down.

If the person you loaned money to forgets to repay you when they said they would, Moore says it's OK to remind them. He explains: "From the interviews it was apparent that some people like to be reminded that they still owe money - as it can demonstrate that our friends are reliable and confident - things that we value socially."

You need to make a judgment call about whether they are the kind of person who would let it slip their mind, whether they are suffering financial issues more generally, or whether they are trying to get away without repaying you. In some cases a nudge will be very welcome, in others it will pile added pressure onto someone struggling financially.

Think before you lend

Of course, there's always the chance they will never pay you back, and this is something you need to factor in from the start.

Before handing over any cash, you need to appreciate that even if it's paid back in full and on time, it could have an impact on your relationship. Moore says: "As money holds a status of power in western society, there is an emotive charge when money changes hands between family friends, even if it's only for amounts of up to £100."

If it is a friendship you really value, then you may not want to hound them for the money, or take them to the small claims court, so the most sensible approach is never to lend money you cannot afford to lose.

In many cases, if a close friend asks to borrow a small sum in an emergency, then the answer might be to offer it to them as a gift - and tell them they can repay the favour next time you're in a hole.

That way they get the cash they need, and nobody needs to worry about the risk of an unpaid IOU.

But what do you think? Would you lend money to friends, and has it ever caused you problems? Let us know in the comments.

Tips on Lending to Family Members and Friends

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Most common causes of debt
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Most common causes of debt

There are some very common reasons for building up problem debts. Here we reveal seven of the most common, and what you can do if you face them.

Unemployment or illness that means one or more of the household’s earners are unable to work will bring a profound change in family finances, and according to the Money Advice Service is the most common reason for getting into problem debt.

If your circumstances change, therefore, you need to immediately address your family finances, and put everything on a minimum spend lockdown. You should also look into the benefits and tax credits that are available sooner rather than later, to try to close the gap.

If you are on the kind of contract that means varying hours, it can be incredibly difficult to work out what you can afford to spend - making it the second most common reason for getting into debt - according to the Debt Support Trust.

Rather than swinging through the extremes from week to week, the best approach is to establish a budget that will work in the leanest of months, so you don't find yourself getting used to the months when you work more hours.

According to Citizens Advice, trying to service too much debt is the third most common reason for getting into difficulties. The TUC found that those with problem debts spend 40% of their income on debt repayments.

If you are in this position, you officially need some help with your debt problems. If you continue to rob Peter to pay Paul, you will end up owing more and more, so you need to take stock and talk to a debt charity about all your options.

The double-whammy of the legal bills combined with the incredible cost of establishing two separate households is enough to make divorce or separation the fourth most common reason for going into debt - according to the Debt Support Trust.

There's no easy solution, but if you are going through this, it can be helpful to talk through your financial situation with someone you trust or a debt charity, who can help you balance a stretched budget.

Problem debts aren’t necessarily caused by a sudden shock to the system. According to the Money Advice Service, 20% of their clients are simply trying to live on an unsustainably low income.

If you are in this category, it’s important to seek help on the benefits and tax credits you may be able to receive. It’s not always easy to navigate the system, but charities like StepChange have experts on the benefits system who can talk you through what’s available.

The combination of rising costs and stagnating wages over the last few years has meant increasingly people saw their monthly wage cover less and less of their monthly outgoings. This position has started to ease more recently, but has left many people far worse off than before the financial crisis. The Money Advice Trust said a combination of this and unexpected costs was responsible for almost one in ten problem debts.

If you consistently spend more than you are expecting, it's well worth keeping a spending diary. That way you can establish the real cost of living, and start to identify where you can cut costs.

The Money Advice Service says it commonly deals with individuals who have struggled to get to grips with budgeting and debts, and have got into debt because they don’t have the skills and knowledge to manage their money effectively.

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