Half of all people think they are 'just about managing'

Jar of strawberry jam from above.

JAMs is the horribly patronising term of 2016. It reared its ugly head after Theresa May went into 10 Downing Street, pledging more support for the 'just-about managing'. For the government, this is a group of around 6 million people - earning between £12,000 and £34,000. In reality, however, the government has massively underestimated how many people consider themselves to be JAMs.

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A study by money comparison website money.co.uk found that being a JAM isn't just about income, because families with all kinds of salaries are now classing themselves as JAMs. Almost two thirds of all working UK households class themselves as JAMs (while 6% say they aren't managing at all).

Some 44% of people run out of money part of the way through the month on a regular basis. One in five have less than £100 a month to spare after they've paid essential bills and one in three (32%) rely on their overdraft to get through.

Even seemingly wealthy households are struggling. The study found that half of those households earning £70,000 or more claim to be JAMs. After-all, almost a third of these higher income households regularly run out of money part way through the month and 43% rely on an overdraft.

What's going on?

Addressing the woes of every group that is just-about managing, therefore comes down to more than just slightly tweaking the way in which tax credits are being cut. It means getting to grips with why people further up the income ladder are struggling.

Hannah Maundrell, Editor in Chief of money.co.uk, suggests part of the issue is money management. She says: "For many people just about managing is the harsh reality of only just having enough cash coming in to cover essential bills. For others, it could simply be a case of poor money management... It's surprising so many people on decent incomes are finding themselves just getting by. It just shows that how well you manage financially is really down to how tight a grip you have on your purse strings. Whatever your income the best way to be better off is to check where your money is going, create a budget, and make simple switches that could quite literally save you thousands of pounds a year."

However, the problem runs even deeper than this. Part of it boils down to our relationship with money. Here, two psychological trends are set to trip us up. The first is that as a species of hunter-gatherers, we are psychologically programmed to try to demonstrate our expertise in hunting and gathering (so we can win a mate and improve our social standing). In the modern world, where berry picking and deer stalking are less impressive skills, it comes down to earning enough money to buy big TVs and nice cars. We may be unaware of why we feel the need to compete to have the nicest car in the street, but it's part of our psychological makeup as a species.

The second problem is that we are all prone to a perfectly natural mental process, called hedonic adaption. It essentially means that we get used to our current situation. So when we earn more, we get a bigger mortgage, a nicer car, we come to expect nice holidays, and may send the children to private school. We simply require more expensive things in order to achieve the same level of comfort that we had with far cheaper things when we earned less.

It means we will never feel we have enough stuff, so we will always feel we are struggling - or just-about managing.

The problem here is that tweaking tax credits and teaching money matters isn't going to make these things go away. Instead we need profound culture change to help all of us realise that life won't be any better with the biggest car on the street and the biggest debts.

It remains to be seen whether any government has the ability to manage that.

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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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