It’s not just a low income that creates the burden of struggling to make ends meet. A recent study by my firm, Hoyes, Michalos & Associates Inc., shows that women are increasingly turning to debt as a way to survive on a modest income, often to their detriment.
Not surprisingly, almost half of all insolvency filings are made by women. What is alarming is that women have to turn to bankruptcy for significantly lower debts. In fact, women are filing bankruptcy with debts that are one-third less than that of male insolvent debtors.
There are several reasons why this is happening:
- Women in our study earned on average 10% less than male debtors.
- One in three female debtors were divorced compared to only one in four male debtors.
- Women are four times more likely to be a single parent than male debtors.
- Female debtors are more likely to have student debt with larger unpaid student loans than males.
This paints a picture of a young, single parent hoping to improve the life of herself and her children, who is instead struggling to make debt payments on a lower than average income. With debt payments consuming roughly 22% of her take-home pay, there is often nothing left over after the rent or mortgage, food and other necessities of life have been paid. All too often this results in more borrowing.
Women are more likely to turn to payday loans and other expensive debt choices as a temporary solution – in reality, almost one in five women who declared insolvency carried at least one payday loan at the time of their filing. Unable to find suitable full time work, either because she is caring for children or because she is more likely to be working part-time, an intermittent income leads to default and more accounts placed in collection.
So what can you do if you find yourself in a similar financial situation?
- Begin by creating a budget that balances your income and expenses without relying on debt to fill the gaps. Writing things down can often make it easier to look for small ways to save.
- If you owe money today, include a portion for debt repayment in your plan. Figure out how long it will take, based on your budget, to repay any debts you have.
- In the meantime, avoid expensive debt options like credit card debt and especially payday loans. The added interest will only reduce the amount of cash flow you have to pay for living costs down the road.
- If you can’t make your payments or repay your debts in a reasonable period of time talk to a reputable not-for-profit credit counsellor or a bankruptcy trustee about ways to deal with your debt permanently, rather than continuing the cycle.
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