Reasons for Debt...

Pal

Fair comment, but I think that the genetics are always underlying the culture.

I believe that people are genetically designed to try to appear "better" than their neighbours. However it depends on how culture defines what looks better to the group as a whole.

In the dim and distant past in this country, having the spare earnings to save money was itself a status symbol, and as a result people saved for everything (and also saved for nothing!). They were proud of the fact that they had savings so they did not hesitate to tell everyone.

I have no idea about other countries but perhaps many still have this cultural bias?

I guess that an exteme form of this behavior are those rare older people who live in relative poverty while having reasonable savings that they should be using to make life more comfortable?

In the past debt was seen as a very bad thing, mainly because the impact of bankruptcy was much more sever than today. Some time around the 1960s/70s/80s this changed, and culture defined looking better as meaning showing ownership of expensive luxury goods and clothes. The genetics is still underlying this.

The advent of bankruptcy laws and the welfare state has gradually removed the stigma of bankruptcy, while the chances of actually become bankrupt have reduced due to consumer and credit card protection laws. As a result, people today are far more willing to risk taking on debt to satisfy their emotional genetic requirements to look good compared to their friends and neighbours. Culture simply defines how they achieve this.

A theory that I just thought up:

People now appear far less willing to discuss their earnings than was historically the case. Assuming that this is true, is it because they do not wish other people to know that, despite outward appearances, they are not that wealthy, and in fact all their trinkets are funded by debt? Are they "scared" that the facade created by their debt funded goods will fall in the face of evidence of a lower income than their peer group?

[Deleted User]

A great many people in society who simply like to spend on credit - I do not believe, are exorcising any emotional need. They are giving in to a materialistic urge to have something NOW - regardless of whether they need it or not, regardless of whether they set out for it in the first place and certainly without any thought as to WHEN they might own it - i.e when it has been paid for.

A one off purchase at a time of distress to cheer oneself up - maybe - but not £50k worth of gradually accumulating debt over a long period of time and across many credit/store cards.

The media and the lenders between them, make it easy for people to have it all NOW and this ethos ensures that debt will continue to rise. Perhaps by doing away with the cashless society we have now become and get back to hard cash - letting people SEE the money they are spending instead of figures on a receipt or statement might have some impact?

The majority of people are on ordinary, and often low incomes with all the usual commitments - yet the constant portrayal of the young, rich and famous leads people to either try and keep up or to see themselves as having failed if they don't.

We live in a materialistic, impatient world, ever encouraged by greedy lenders. At one time the question would be - how many households have a car? Now the question is how many cars per household? Or TVs or whatever.

How many people bought plasma screens to watch Euro 2004 simply on the strength of all the ads on TV? How many people have actually paid for them? Was this pandering to an emotional need?

It is an interesting point raised about how debt may be differently viewed across different cultures. I have to say that in my time as a debt counsellor I never once saw an Asian or Indian client. There may of course be other reasons for this and I am conscious of the fact that in some other cultures there are women who do not get their own money or any spending power at all.

But the important question is how do we curb this downward spiral? Without doing so the future could be bleak for many people.

Pal

A great many people in society who simply like to spend on credit - I do not believe, are exorcising any emotional need. They are giving in to a materialistic urge to have something NOW - regardless of whether they need it or not, regardless of whether they set out for it in the first place and certainly without any thought as to WHEN they might own it - i.e when it has been paid for.

A one off purchase at a time of distress to cheer oneself up - maybe - but not £50k worth of gradually accumulating debt over a long period of time and across many credit/store cards.

I think you misunderstand what I mean by "emotion". I don't mean people buying because they are upset. I meant that purchasing decisions are based entirely on what people feel they want (a gut feeling if you like) rather than a rational decision based on their needs. This is exactly the "materialistic urges" you mention.

[Deleted User]

Oh well, seems far too complex for me.

I know about the urge to buy and munch chocolate.

nh

BA-744.    One of the most important considerations for people buying a house is what it looks like from the front, and people will pay far more for houses that look good from the road.  

The funniest thing about this is, are you even impressed when someone has a house that looks nice from the road? No. People are too wrapped up in what others think of them when others are probably not thinking about them at all!

I consider myself to be very rich but not in a financial sense. I have a wonderful partner and a very enjoyable job and when I was growing up we didn't have much money so we were taught to value these things above material possessions. I cannot say that works all the time cos my sisters were brought up in the same way and they thought we were terribly hard done to.

I understand I am not normal but it just seems to me to be the most ridiculous thing to do to get into debt, put yourself in a position where you are going to be LESS happy (ie. skint) just so you can 'impress' people who will probably only be envious if they're bothered at all! Envious people do not make the best friends and I don't think it is very healthy to want to make your friends/neighbours jealous.

I think the card culture has got a lot to do with it, people don't realise what they are spending most of the time. A lot of people use cash as a means of reducing what they spend (or at least keeping more of a track on it) so it makes sense that cards have encouraged debt. The thing with cards as well is that you can just go out and buy something for £500 as long as you have the limit available, if you didn't have a credit card you would either have to save or get a proper loan - not the easiest of things and not the sort of thing you do on a whim. Going to your bank to get a loan for £500 seems 'worse' than spending £500 on your card.

BA-744

Thanks everyone for your views and ideas. There are a few strands of argument which seem to be rearing their heads up again and again.

One is the constant advertising of loans and credit cards - constant exposure to something makes it more familiar and acceptable. And the advertising has definitely increased manyfold since the 1980s.

Another is the increased media focus on celebrities and their lifestyle - the cult of the celebrity. A couple of decades ago, if you wanted celebrity insights you had to actively seek it out - now it is constantly thrust in your face.

A more subtle reasoning raised is the prevalence of the credit card culture. It would be interesting if there any people on this site who have run up large debts, whilst still doing all their spending in cash.

Status has also been mentioned by Pal by the fact that in the past, status was often exhibited by how much savings you had stashed away. Now, the prevailing culture has changed, so that conspicous consumption is the path towards high status and people who have savings are termed negatively as "skinflints" or "tightwads". Pal - that's a good argument, well done.

I would like to add another reason which I've identified. We've mentioned the increased focus by the media on celebrities. But I also think, that there are also more subtle forces at work in the media. For example, thinking of newer TV programmes versus older ones, there is a definite shift towards portraying richer people and their lifestyles. Think of Friends versus Rising Damp, Footballers' Wives versus Only Fools & Horses. A further example is in weekend broadsheets, where million-pound homes, luxury Caribbean hotels, £500 Prada dresses, etc. are portrayed in such a matter-of-fact manner that it is hard not to assume that every other person has them.

I know that there has been a recent book called "Status Anxiety" by Alain de Buton (sp?). Perhaps there could well be some insights there on how debt has spiralled.

Any further thoughts and arguments are welcome.

Joe_Bloggs

Cars and kids will always cost more than you planned,  They warp your thought processes more than television advertising.

nh

Anyone who sees a £500 Prada dress in the Sunday Times and thinks 'I have to have that or my life just will not be worth living' deserves to swim in a sea of debt.

Debbie_Hobdell

Whatever the reason for people spending on credit cards in the first place, (much of which I personally put down to the destigmatising of debt and the free & esy availability of CCs), a large part of it is the problems that occur because of the "it will never happen to me" scenarios.

Some people do just spend, spend, spend with little or no regard for their financial situation.

Others spend what they consider to be a "reasonable" amount, bur the end up in a sticky situation because of ill-health or redundancy. This is from personal experience!

My husband fits into the former category, I fit into the 2nd, but because hubby was made unemployed last summer my own debt is now increasing becuase groceries & petrol have to go onto CCs - mine!

nh

And you can't ignore the fact that some people just get a buzz from spending. I get a buzz from not spending!