Half of Scots run out of money before pay day, finds study

Four in ten Scots are worried about their debts and one in ten are struggling to reach pay day without getting into deeper difficulties, according to research by insolvency trade body R3.

The figures emerge a day after it was announced that the consumer prices index (CPI) measure of inflation rose to a record 5.2 per cent last month.

Almost 40 per cent of Scots expect their personal finances to deteriorate over the next six months, as rising prices, low wage inflation and the prospect of further job cuts adds to the pressure on households. Six in ten Scots in debt cite credit cards as their biggest worry, while a fifth are concerned about overdrafts and the same proportion by mortgage repayments.

Iain Fraser, a Scottish member of R3, said the high dependency on public sector jobs north of the Border leaves Scots vulnerable to even greater problems.

He said: “With individuals already stretched and struggling to keep pace with rising prices and frozen pay packets, the prospect of many more public sector redundancies in the coming months is of huge concern.

“Large-scale redundancies could mean very large numbers of people with enormous financial burdens are suddenly unable to keep up their payments and fall into insolvency.”

R3 – which published the report before the Scottish Government reveals the latest insolvency numbers today – found that 10 per cent of Scots have run out of money within a week of getting their monthly pay. Another 5 per cent are struggling by the end of the second week and 35 per cent by the third week of the month.

Many of those in debt are turning to expensive short-term loans to bridge the gap, warned Fraser. “Individuals turning to short-term loans and credit cards should be wary of the high interest rates that often accompany these products which means that total debt can quickly snowball out of control.”