The debts of despair

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?

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7 Responses to The debts of despair

  1. rik says:

    I blame the media and marketing men being too good at brainwashing! Or maybe people just don\’t have any common sense anymore. Keeping up with the Jones\’s has a lot to answer for!

  2. Christine says:

    I\’m with Rik on this. You can do so much with make your own, grow your own, pick it up from freecycle even if it needs a bit of refurbishing, visit the local recycling amenity and pick up things that other people throw out for a tenner, put fewer clothes in the wardrobe and wear those you have. Just as an example how else would posh frock exchange shops stay in business if people didn\’t have perfectly good clothes to clear out for less than cost?

  3. Karen says:

    The trouble is Piper the banks etc make it far too easy! My daughter is on benefits, she has to have a bank account to have her benefits paid onto, the bank gave her a loan(!) knowing she was on benefits(!) and now she has involved another lender , another loan in order to pay off the bank(!)  where will it end! EVeryone is too quick to say take this card, take that card, cant get a loan? Come to us… the kids dont stand a chance! Of course they want nice things, of course they want to give thier kids playstations etc. At what price?…. 

  4. Karen says:

    With all due respect Chris, we all have experience and knowledge behind us, these things weren\’t so readily available to us as youngsters. They dont want hand-me downs anymore, no more hand knitted cardi\’s for the babies, they want clothes from Next. Who is to blame?

  5. Christine says:

    Karen I do know what you mean. Locally though there is a terrific trade on the freecycle website of baby gear – clothes, prams, pushchairs and garden toys up to age 3-4. There are also trades of videos for slightly older ones and requests for play items up to about 7 years old. I suppose by age 7 peer pressure and television kicks in and parents find that such things are not acceptable. But it looks as if there is a certain amount of make do still around.

  6. piper says:

    Karen I\’m shocked that the bank would be so irresponsible as to encourage your daughter into taking out loans. What a nightmare. And with the credit cards these days, the enormous credit limits they hand out are ridiculous. I was offered a £10,000 one but cut it down to £3k so I wouldn\’t be able to borrow more than that. And it\’s true, I know when I was in my 20s there was no way I\’d buy something from a charity shop unless it was for a fancy dress party or something. The peer pressure to wear new clothes was too much.

  7. mo118 says:

    I find it very frustrating that there is this ridiculous amout of availability of \’easy\’ money.  Another problem nowadays is that most people are riddled with debt from their time at university and therefore are in the mindset that a \’bit more\’ won\’t really hurt.  I don\’t think that banks and marketing are really to blame though.  I really feel like a lot of people like to shift the blame to almost justify what\’s happened as not being their own fault.  I think that schools should teach simple money issues as part of compulsory education because school is supposed to equip you with skills in life.  I steer clear of any type of loan except for my student loan which I have no choice about because I need a university education for the job I want.  I do also feel that parents and the children should be responsible.  I can\’t talk from experience as I don\’t have children yet but I really will try in vein to not let them get bogged down with peer pressure.  As a child I distinctly remember how I wanted to get what everyone else had but once I got it I felt no satisfaction whatsoever proving how material things really don\’t make you happy.  The problem is the instant buzz is what people try to recapture and if loans can provide this then obviously they take it on.  Despite the terrible housing market at present I am saving my student loan for a deposit on a place and if possible saving enough to pay the majority/if not entire amount.  This sounds unrealistic but if I\’m saving now I think when I hit 30 I should be able to pay for it.  My parents thankfully never had a mortgage as they saved the way that I am saving now which is the main reason for me not wanting to take on extra loans.  With respect to your comment about being 20 and wanting new clothes: I am 19 at the moment and a student in London where of course keeping up with trends can be intense.  However last year I managed to wean myself off wanting to get each new look and be in fashion.  I just mix and match my older pieces and buy the odd piece to finish several outfits.  I can\’t express how satisfying it is to not be bogged down by a compulsion to spend on clothes or gadgets.  When I go into a shop I used to challenge myself to not buy anything over £10.  Then it went down to £5.  Eventually nothing.  I still feel really happy walking out of a shop knowing that I am no less deprived.  I only wish more students realised how far money can stretch.  Everyone knows that London is the most expensive place to live for everyone and even more so with students but it is possible to save money here.  Yes I may be eating alongside my friends at lunch in a pub with my packed lunch but at the end of the day it costs about £5 less and I just see that £5 eventually going towards a house and my future.

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