How does debt usually occur?

empfun

I think the most common cause of debt......bad judgement.

danmanchester

empfun wrote:

I think the most common cause of debt......bad judgement.

Bravo!

When I was a child it was instilled into me that "credit/HP/ "the never never" was something to be sneered at and avoided at all costs if possible. Because it really is just living beyond ones means - don't care what anybody says..I'm talking about frivolous unnecessary debt here:credit cards/store cards "holiday loans" etc - I accept mortgages are a different matter.

I've lived by this premise all my life, never had a loan or HP or credit card - it's all down to your own mindset..believe me if you're looking at something that looks like a "must have" whether in a magazine or shop window - that impulse purchase moment soon disappears when the source of funds needed to pay comes from real cash in your pocket/bank and not some plastic "flexible friend"! Also, you tend to appreciate things better and not buy utterly useless crap when you've saved for them and spent hard earned cash.

That said, living within my own means has had its' downside - I was turned down for a Vodafone contract mobile because I have no credit history :rotfl: !
As it turned out, BT mobile had a better deal and I got one of their mobile offers without a hitch...mind you I have a 20 year customer history with them.

Sorry for rambling:p .

Xbigman

Thats a phrase I've not heard for ages. 'The never,never'. It should come back into common usage.

Never, never finish paying so never,never start.
Regards



X

nrsql

Everyone is different but I think a lot is due to the change of attitude towards debt.
Used to be that debt was considered a bad thing - and not really talked about in public.
Mortgages were smaller and paid off as soon as possible.
Now large morgages are common - partly due to the rate increase in house prices. And the increased tax burdon doesn't help.

People start out living beyond their means and get expensive credit. Eventually they realise this is a problem and find about long term loans and the lower monthly payments (could be long term loan or add it to the mortgage). Lenders are happy because this is all profit for them and they concentrate on the payments rather than the total cost.
Then instead of paying off the loan they still live beyond their means - less than before due to the lower payments.
Eventually consolidate into more long term loans.
The cycle continues - but spirals due to the increased payments due to the extra loans.
Eventually long term loans aren't available (house prices haven't increased, bad credit rating, too much debt for income) and that's where things end. Stuck into expensive debt and unable to meet the payments.

Eventual outcome - bankrupcy, windfall or a change in lifestyle before it's too late.

This is without any change in circumstances.
It's not easy to realise that your expenses outweigh your income unless you keep a record - too easy to blame everything on unusual expenses or just think you'll clear the credit card bill next month.

sarah1

I think that i was bought up the same way as 'danmanchester' if i haven't got the money i can't have it simple as that. I have never gone to my parents for money or want people to bail me out,i would be too ashamed to.
I am 32 and we have a £70k mortgage on a house worth around £180k We both work i earn £17k and oh £21 i don't consider myself as tight fisted i'm just careful. Friends and family have great xmas and birthday prezzies. and i only try to buy 'value for money things' and i always ask myself if i think something is worth the price or if i can get it cheaper somewhere else.
We have no credit cards just the thought of it makes me cringe. We would love to have a great big plasma telly and a brand new car on the drive every year but we haven't got the money so that's that. We have lots of nice things and they are all paid for.
I have friends that live beyond their means and credit cards left right and centre their money is never their own. So if anything went wrong they would be i s*** street. I know that if either of us lost our job tomorrow we could manage on one wage.
My advice to people is stop and think not what it is costing you today but how much is it going to cost you in the long run, then have another look at it and ask yourself is it really worth it. And can i save up for it instead.
Good luck all, i know that we live in a very competeive world and it's nice to have nice things, but we can all have these things if you are careful and not spend more than you earn each month.

meanmachine_2

Yes, but don't forget, all these homeowners on here who proudly boast about how much their houses are now "worth" forget that it's only reached such a ridiculous price because of all these young people being so stupid with debt.

Not so long ago, a mortgage lasted 20yrs with capital repayments.

Then it became 25 years.

Then it was 25 years interest only

Now it's as much as 30 years+ interest only, on a self cert (no proof of income needed).

Meantime home owners see their house rise in value and think it's all OK. It ain't. It's a house of cards.

But anyway I digress. My point is that young people hoping to get on the ladder HAVE to take out huge debts, and often find themselves living off credit cards just to afford basic goods such as food! How mad is that?

TimC

I think a billboard advertisment for National Savings that I saw 15 years ago and still sticks in my head, sums up most of the responses very neatly:

"Remember when you used to save before you spent?"

At the time, I'd just cleared my credit/store card debts - and still recall those awful times vividly. That experience turned me into an instant Moneysaver and I've used that advert as our motto ever since.

I still consider that we are in debt as we owe approxiamately £50k on a repayment mortgage - our debt free day is currently September 2007 (15 years early).:beer:

youngandreckless

I think another point worth mentioning is going to Uni. Years ago it wasn't as common to go to Uni - more people went out to work. Now it is much more common to go to Uni, and as there are no grants, you find more people at a very young age having to get and live on credit. I think that if you spend early adulthood accepting this as normal, then like it or not, you find that this is how money is to you - playing catch up. I know its not always the case, but I've seen friends and family in this position.