As an aspiring frugalist, money is usually on my mind. But The Parents Guide to Money (a budgeting and benefits guide for prospective parents), which I blogged about on Wednesday, got me thinking about budgeting in general and, specifically, about the debts some people are unfortunate enough to get themselves into.
Perhaps you read about the broke lottery winner, John McGuinness, who blew his way through £10m, partly due to a bad investment in a football club, who now owes £2m and is thought to be applying for a council house. This guy is an extreme example, but it just goes to show that no matter how much money you have, it can all run out if you don’t watch your finances and overspend.
I’ve had my moments. Years ago when I broke up with a boyfriend, my rent doubled as I moved out of the cheap room we lived in in a shared house and into a flat with a friend. My salary as a TV researcher didn’t go far in London anyway, but to cheer myself up I started going out a lot and buying clothes on a credit card. Soon I owed about £1,500, which eventually I paid off, but then quickly ran up again – this time to about £3,000 – after I bought my first place. Probably £2k of that was on furnishing and decorating the flat, but the other £1k the result of random shopping expeditions and nights out.
But while my mother was horrified, and I had a few sleepless nights, compared to some happy shoppers out there, this was Mickey Mouse money. What frightens me is the number of people I know – all intelligent, well educated people – who have run up enormous debts, upwards of £30,000 via credit cards and loans. And this isn’t university related debt. With the exception of one friend who borrowed to save her business, most have simply spent money on useless items they don’t need, like clothes or gadgets. One is now travelling the world after coming into some money, despite the fact he owes tens of thousands to creditors. Is it because owing money to a company doesn’t feel as bad as owing it to a real person?
Why are people compelled to run up these kinds of debts? Is it simply because credit cards and loans are too readily available and we are constantly bombarded with marketing emails tempting us to borrow instead of saving for something we want? Or is it some kind of need to live up to an imaginary lifestyle that we think we should enjoy? Like wanting to be a WAG? God forbid! Maybe it’s a reaction to the frugality of the past? Our parents’ attitude to money? Jane Furnival’s book Smart Spending includes an interesting questionnaire about our grandparents and parents’ attitudes to finances, which I found to be a real eye opener.
Writer Barry Williams reckons that advertisers and retailers have conditioned us to believe that everything we see in the shops is something we need, and when we see a discount ticket next to it we feel like we’re getting a bargain, even though the item will probably end up unused in our wardrobe or kitchen.
Apparently the government is introducing budgeting education into schools. Not before time, I think. I just thank God that my mother is a budgeting whizz, and that I live with DJ – an individual overflowing with Scottish blood who spends months pondering any crucial investment, such as whether to buy a packet of crisps, before splashing out…
Do you or your friends owe money on credit cards? How or why have you run up debts? What needs to change?