Unless we Address Income Inadequacy, we will Never Comprehensively Address Personal Over-Indebtedness
Income inadequacy is majorly caused by poverty. The United Nation refers to those people who leave below a dollar each day to be poor. In other words, poverty is a situation where someone cannot afford whatever he desires at a given time (Rochon, 2018). As far as human desires are concerned, those who cannot afford basic needs are considered to be poor. Poverty causes much negativity in human life. Actually, poverty can even cause death. In some parts of the world, poverty has caused deaths of a good number of people. According to UNICEFF, 22,000 children die each day due to poverty. This is an indication that poverty situation should be addressed with immediate effect.
According to statistics, more than 3 billion of the world’s population lives below $ 2.50 a day. This represents almost a half of the world’s population. Poverty is real and it is evident in different spheres of life. Over the years, the United Nation has developed different strategies to curb poverty but the fights have not resulted to a complete success. Poverty affects both children and adults. Statistics indicate that 1.3 billion children live in extreme poverty. Extreme poverty refers to the state where someone cannot afford the basic things which are needed on a daily basis.
The first step to address poverty and over-indebtedness is to look at their causes. Notably, these causes are closely related to lack of adequate income. The law of demand incorporated that an increase in consumer income is likely to cause a significant increase in demand of goods and services. People who have enough money tend to buy more goods and services. Additionally, those who have money are likely to pay their debts in time. Lack of money can easily lead to over-indebtedness since debts can only be settled in monetary terms. People who don’t have money are not likely to borrow loans but if they do so, they tend to pay in good time. On the other hand, lack of money causes an increase in borrowing since there is no source of income yet people need money to sustain them. Those people who borrow out of hanger are not likely to pay their obligations when they become due since they are not expecting additional money from anywhere.
The first cause of poverty is lack of enough money. Ideally, money is not always enough since the more you have it is the more you need it (Jin and Westmore, 2018). That is why many people who have money tend to invest more than those who do not have. The main reason why this happens is that many people tend to desire being above their current monetary status. Financial status is likely to determine the purchasing power of an individual. The power to bull goods and services enable people to pay their obligations when they become due. Furthermore, people who have money do not buy on credit more frequently as opposed to the poor.
Poverty can also be caused by economic problems. Economic problems are those which result from the forces of market and the actions of the government and other key stakeholders in the market. Inflation is one of the dangerous economic problems. Cost-push inflation is likely to cause an increase in the prices of goods and services in the county. Such increase will automatically lead to an increase in overall expenditure. People will have to spend more money as compared to before inflation. Therefore, such people may likely to become insolvent. Apart from companies, individuals can also become insolvent due to continuous borrowing from friends and financial institution.
An increase in income is the best solution to solve insolvency among individuals. People who have a good income source will not borrow a lot of money (John and Roche, 2018). A salaried individual will tend to budget for his money so that it can take him up to the next pay day. Due to budget constraints, an individual can opt to borrow in expectation of paying when it becomes due. Those who have a source of income are likely to pay their debts as soon as they get paid. However, those who do not have a good income source do borrow due to lack in expectation to pay in a later date when he will get the money. They anticipate getting money without the surety of its source and time. Additionally, income can enable someone to meet their basic needs. Shelter is one of the most crucial aspects of human needs. People cannot live comfortably without a roof over their head. Therefore, income is capable of meeting not only primary but also secondary needs.
An individual’s financial status is determined by his income adequacy. For those who have adequate income, paying debts and meeting daily expenses would not be an issue. However, those who have inadequate income are likely to face challenges in meeting their day to day activities. For instance, food is one of the most important basic needs. Actually, people cannot live without food far a reasonable period of time. In this regard, governments and other non-governmental organizations do take initiatives to distribute food to those who cannot afford meals. There are those people who cannot afford even a single meal in a day due to lack of money. Therefore, the root course of this problem should be dealt with.
Employment can cause an increase in an individual’s income adequacy. In the contemporary world, many people are employed in different firms and governmental organizations. Employment generates income to the people to meet their basic needs. In many cases, different jobs have different modes of payment. The most common one is monthly payment. Employers pay their individuals on a monthly basis so as to give the employees an opportunity to save some money for future use. According to Keynes, there are three motives of holding money that is, speculative, transaction and precautionary motives. Transaction motive states that people hold money to meet their daily expenses whereas precautionary motive indicates that people hold money for future use. Regardless of the motive behind holding money, income inadequacy is likely to cause insolvency among individuals.
Unemployment is a key threat to income inadequacy. According to the statistics presented in March 2019, the unemployment rate of Ireland was 5.4%. This group of people includes university graduates who are looking for jobs. Job searching is a tedious process in many countries. Unemployment is one of the causes of criminal activities in the region (Ramsay, 2012). Many people who live in poverty stricken arears such as slums are likely to face criminal activities. Due to unemployment, some people can end up steeling from others so as to meet their basic needs.
The government should address the causes of income inadequacy among its citizens. In this regard, the first step that the governments should take is coming up with effective employment opportunities to help the youth who are unemployed. The youth are regarded as the future of tomorrow. Therefore, employing the youth is likely to shape the future. In many occasions, people tend to rely on the government for provision of employment opportunities. However, self-employment is also a good source of income. Starting a business is a good step to venture into self-employment. Ideally, such employment does not have many restrictions in terms of salary and other benefits as compared to the other form of employment.
People should also take personal initiatives towards ensuring that they have a good source of income and that they are capable of meeting their obligations. Financial obligations such as payment of bills, school fees and other expenses are upon the individual. A father should look after his family by making sure that there is enough food, good shelter and good education for his children. Therefore, an individual’s efforts toward ensuring a better life are also important. In addition, insolvency should not be considered as a general thing. Basically, not everyone is insolvent in one way or another. It depends on individual activities. If someone borrows money or uses electricity, he is supposed to pay for them when they become due. At the time of borrowing people do not think of being insolvent but some of their actions can cause insolvency. Those who are not employed and they are not doing anything about it may tend to be poor in both knowledge and financial terms.
The solutions of solving insolvency services in Ireland are outlines in the Personal Insolvency Act of 2012. Particularly, section 23 of the Act stipulates the guidelines which should be embraced towards solving insolvency problems. Notably, this Act was issued under a legislative process. This means that the government was concerned with insolvency in Ireland and therefore, it had to come up with an effective action to curb insolvency among its citizens. The guidelines are aimed at ensuring that insolvency is rooted out of Ireland. Actually, insolvency has its consequences which are not good for people’s lives.
The first guideline is based on a consensual standard budgeting model. A budget represents the anticipated expenditure which is prepared by an individual or a company. A budget entails what the individual is anticipating to spend and the actual income that he is expecting. People do their budget for their monthly salary. A good budget is proportionate to the amount of income. In other words, those who have enough money tend to make exclusive budgets than those who dint have enough income. As far as shopping is concerned, income inadequacy causes less buying. People do not buy many goods when they are not able to afford them.
Another guideline is the aspect of trying to strike a balance. Many people tend to strike a balance between their income and their expenditure (Brumby, 2018). Unlike governments, individuals tend to have limited sources of income. The government can easily compel people to pay for taxes whereas no one can compel another person to give them money at any given point. The government can also increase taxes when it deems fit. The general public may not have a valid reason to object some of the government’s decisions. Therefore, people face difficulties in balancing between expenditure and income as compared to the government. For someone to balance between the two, he should be contented with what he has. He should also budget for the available resources to avoid financial constraints.
There re fur important components in regards to insolvency. The first one is healthcare. People are supposed to have good healthcare. It is one of the basic human needs in regards to health issues. In many countries, healthcare services are considered as a public good which is left in the hands of the government. Healthcare is also a merit good. This means that if the government leaves it in the hands of the public, it is likely to be under-utilized. However, governments do not offer all solutions to healthcare. People have to use their income when they fall sick. Lack of finances are likely to cause affect the ability of people to access health care services.
Transport and households are other components of insolvency. House hold issues needs adequate planning before they are done. Planning may involve ensuring a family which is easy to care about. In other words, people should have children who they are capable of providing for. The government should regulate the number of births far every family. It should be considered as a law to have a given number of children. People should also ensure that their disposable income can sustain them for the period before the next payment.
In conclusion, income adequacy should be addressed first before looking into over-indebtedness. Notably, insolvency is caused by lack of adequate finances. Therefore, the government should ensure that people have access to income generating activities. This can be done through provision of job opportunities and other incentives such as tax relief to the public. In the long run, personal indebtedness can also be dealt with through personal initiatives which aim at generating additional income to the people.
References
Brumby, F. (2018). Personal Insolvency. Routledge-Cavendish
Jin, Y., & Westmore, B. (2018). Reforms for sustainable productivity growth in Ireland. OECD.
John, Z., & Roche, J. (2018). Life after debt: a critical analysis of the engagement/ non-engagement of debtors with the insolvency service of Ireland. University of Limerick.
Romsay, I. (2012). Between neo-liberalism and the social market: Approaches to debt adjustment and consumer insolvency in the EU. Journal of consumer policy 35 (4), 421-441.
Rochon, M. (2018). Corporate Insolvency in Europe. European Journal of Service Management, 221.