Employees’ over-indebtedness and how employers can help

Gary Fisher, head of Member Education Services at Alexander Forbes Retail.

Debt is spending money that you have not yet earned. Examples of debt include long-term debt such as your mortgage loan – this is a form of secured debt or “good debt” because over time the asset (your house) appreciates in value and, should you default on the debt, the house can always be sold to pay off the loan. Short-term debt on the other hand is usually unsecured debt and examples of this include credit cards and overdraft accounts, where there is no underlying asset and for most part the funds are used to finance day-to-day living expenses. The drawback here is that you cannot “sell” your accumulated assets to pay back the loan as was the case with your long-term debt. The short-term debt is usually what gets us into trouble further down the line as it is easily accessible and adds to over-indebtedness, even with regulations in place set out by the National Credit Regulator, we battle to pay off the ever increasing repayments at the end of the month. (more…)