The Micawber Principle – Who owes more than they can repay?

Spending more than you earn is the quickest route to misery – so said Dicken’s character Mr Micawber – we look at people with debt worries and the numbers that can’t make ends meet.

“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

So says Wilkins Micawber in Dicken’s novel David Copperfield. This quote has become so commonly used as a definition of the consequences of debt that it has entered the English language as “The Micawber Principle”.

Well, in the second of an occasional series of short blogs looking at the characteristics of people who struggle with debt, I decided to try to find a simple measure of just how deep in the mire the people who seek ClearDebt’s advice are.

I chose to divide people up by the same take-home pay groups i used in my last blog and to find the proportion that spent more on their ordinary living expenses (not including credit repayments) than they got in their pay-packet every month.

Outgoings vs Income

I guess I wasn’t surprised by the general conclusion – that the less you earn the more difficult you find it to make ends meet. But, I was surprised by just how many people spend more than they earn: Amongst people earning less than £10,000, 13% were getting deeper into debt every month. And, amongst those earning £10K-£20K, it was 9%. Even amongst strugglers taking home more than £50K a year there are still some who admit they can’t stretch their pay to meet their outgoings.

Overall,  one in fourteen of the people who asked for our advice were getting into deeper debt every month.

Last time – is debt more common amongst people on the lowest incomes?

Next time – how long could it take people to pay off all their debts?

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