To think getting into debt is incredibly easy?

[Username1917]

I had a comfortable upbringing, parents taught me “don’t buy what you can’t afford, saving is important” etc.

I got a job at 18 and a few months later was offered a credit card by my bank, for the first few months I paid it off in full religiously. Then I thought well I’ll just pay half this month and half next month, no big deal! Then it spiralled and I thought oh I’ll just switch to an interest free deal and pay it off before it ends. Then when the interest free deal expired I got a loan over 5 years because it was “much cheaper” per month.

Before I knew it I had debt (including PCP car) the same level as my salary, at the time that seemed very manageable.

I’m lucky that I have a well paid job now and have paid it off in full. It’s given me a right kick up the bum and now I have no debt, but AIBU to think this is not uncommon, even having grown up with parents that tried to teach me about money?

@seepingweeping

Totally agree. They need to show kids money management.

Who is "they"? Most children have parents/guardians and this firmly comes under things you teach your own kids.

All schools teach arithmetic and how to calculate interest/percentages. Credit cards are not given to children. Financial difficulties excluded, adults need to take responsibility for their own decisions.

Yes of course big business /capitalism constantly marketing stuff to people is also an issue. It's just not the only or (I think) main cause of debt problems. IMO.

I have thought of another parallel between weight gain and debt gain.

At least for me, I now realise that when I stop looking at the scales/bank balance I know that a problem is creeping up. I recognise this ostrich like behaviour in myself.

I'd go as far as to say that society expects you to be in debt. Significantly, if you attend university.

Rather than teaching kids maths that they’ll literally never use, they should have modules on this sort of thing and their knowledge should be tested at GCSE! It would be a good topic for essays also to encourage critical thinking and so much more relevant than some of the stuff being taught.

I do agree that it is very easy to get into debt (and a lot harder to get out of it!) however, I think it has a lot more to do with lifestyle choices, than the availability of credit.
Many people are not prepared to wait and so use credit as a way of having things right now, social media makes this even harder as many want to keep up with others.

We use our credit cards every month for every purchase instead of our debit cards as we get points, we then pay the credit card off in full every month. Except for one that is on an interest free deal, we have paid the minimum payment throughout the term but, we have had the full balance sat in our account the whole time making a small amount of interest and we will pay that off next week just before the term ends and then close the account. Credit can be a great tool if used correctly.
We have a total of around £40k available on our credit cards but would never use it (unless we had that amount sat in the bank to pay it off!)
We bought our house 9 years ago, it needed cosmetic work in the whole house, a new kitchen and we knew it would need a new boiler at some point. We had the budget for the kitchen and made sure we always had enough savings to replace the boiler in the bank (only replaced it 2 years ago) The rest had to wait as we couldn't afford it at the time, infact it is only now that we are properly getting around to doing the bigger jobs as we can now afford to.
We drove shitty cars, and even coped with just one car where possible as we couldn't afford better, we didn't take holidays, we bought things second hand or went without and we had a strict budget and stuck to it and finally after many years we are in a much better position and while not rich by any means we are comfortable and do not have to watch every penny.
On the other hand I have a friend who has similar income to us but is in over £20k of debt because she wanted everything now and stuck it all on credit and is a risk of losing her house, in fact, it is only her family helping her out each month that is preventing it. She is still not learning though and still spending money on luxuries instead of overpaying her debt!
When I was younger I got into a small amount of debt (about £2k) because I wanted to live the same life as my friends appeared to be, luckily I met my husband and settled down a lot, as soon as I became pregnant with our first we decided to be very careful with money, we paid off our overdraft and never used it again and were very careful as I said above.

I think rather than demonising credit, people need to be educated on how to use it properly and I think Martin Lewis is a great start for many, I love how he is trying to get money looked at in the curriculum too, however, people also need to question themselves on purchases and learn to accept deferred rather than instant gratification in life.

I grew up on credit cards/store credit/etc, not a life of riley more my Dad struggling to earn enough to pay for life no fancy cars/holidays etc. At 18, I was buying a cheap pair of shoes in the sale in Faith, they offered me a store card queue leaving with 5 pairs of shoes, I had a credit card, put a few bits for my wedding on it with intention of paying it off the pay day following my wedding queue having a car accident and not being able to pay my excess before I knew it with a few other bits I added I owed 3k and it never quite happened that I paid it off until Covid 19 hit and I had nothing to spend money on so I used it as my opportunity so much wasted money over the last couple of years.
I am now debt free - apart from my mortgage, I have a bathroom on 12 months interest free but I have that money in my bank account ready to pay it off and had it before I took the bathroom out.
Education at school IMO needs to be improved, yes it should also be at home too but some parents such as mine didn't educate properly, as soon as your 18 and money is offered and your a skint student its a dangerous time.

People saying they need to teach children about money (presumably at school?) are making the easy mistake of thinking that debt is an arithmetic problem not a behavioural/cash flow problem.

It is very easy to comprehend that spending money with interest on a credit card means you owe more money, it's a lot harder, and sometimes not possible, to decide to take the sting of a cost now than to postpone it until some future date.

We have a total of around £40k available on our credit cards but would never use it (unless we had that amount sat in the bank to pay it off

If someone wanted to borrow that amount of money from a bank for a loan, for a mortgage etc, there would be a lot of checks, questions and you would probably have to secure it against an asset.

Yet credit cards can easily - if you have enough, build up to that level of potential credit and you could find yourself using it - and then getting hit by credit card interest.

I think that it can be too easy to get large amounts of credit via credit cards - and stores do tempt people with them especially store credit cards.

Then you get the incentives of points, cash back etc to make you use them.

It's all behavioural science as well.

I am glad that they have stopped people using credit cards for gambling.

However - there are people who say that there are people who use credit cards for purchases they don't need - and no doubt that's true.

There are also people who use credit cards, cash advances etc because life itself can be expensive, and they may just want to get the essentials or even pay rent, and circumstances means they have to use a credit card.

And then credit card interest easily builds up.

But that's still better than some of the extortionate and perfectly legal loans out there that are also a source of massive debt.

I think some of it is not expecting the entirely predictable unexpected.

So, you don't know for certain your car will need repairs, or the boiler will break or whatever. But it is likely that something will happen. So ideally you should put money aside for those eventualities. Similarly Christmas - you know it is expensive, & it comes round every year.

We've taught our twenty-something DD to save upfront and then buy outright rather than on credit, because whilst things look affordable when you are earning, what if you lose your job.

When she got a car we taught her to set money aside for expenses, as though we didn't know when they would happen, we knew they would.

However, also, she has been incredibly lucky that we were willing and able to fund 'firsts' for her, so she didn't have to start in debt. e.g. We paid the first year of car insurance, so in year 1 she could save to pay year 2 up front, and so on.

If you have to go into debt just to get going as an adult, it must be incredibly difficult to claw yourself up out of it.

So, you don't know for certain your car will need repairs, or the boiler will break or whatever. But it is likely that something will happen. So ideally you should put money aside for those eventualities. Similarly Christmas - you know it is expensive, & it comes round every year

^^ This. So many people talk about their finances being derailed by an 'unexpected' car repair, or because the washing machine broke, or because it was after Christmas, but the reality is that, if they have money available in their budget that they haven't put by, and instead have spent on non essentials, being short of money for car repairs or washing machines is entirely their own doing.

Yes I think so too iv never been in too much debt only a few thousand it's all paid off thanks to working all the way through COVID credit cards are designed to put you in am debt so they make money

So, you don't know for certain your car will need repairs, or the boiler will break or whatever. But it is likely that something will happen. So ideally you should put money aside for those eventualities. Similarly Christmas - you know it is expensive, & it comes round every year

Putting money aside for repairs.
Putting money aside for a house deposit
Expensive rents
Low wages / gig economy

And easy credit..

It's easy to put money aside for future issues when you have money to put aside.

@chomalungma

So, you don't know for certain your car will need repairs, or the boiler will break or whatever. But it is likely that something will happen. So ideally you should put money aside for those eventualities. Similarly Christmas - you know it is expensive, & it comes round every year

Putting money aside for repairs.
Putting money aside for a house deposit
Expensive rents
Low wages / gig economy

And easy credit..

It's easy to put money aside for future issues when you have money to put aside.

Yeah... posts like this are fine in the context of someone who has spare income to put aside. Millions don’t. A bit of bad luck that you couldn’t financially physically prepare for can easily plunge you into debt that you’ll likely never have the excess income to pull yourself out of.

I agree.

If you can start with a buffer or someone setting you up it is a lot easier to stay debt free than starting with nothing.

@TeenMinusTests

I agree.

If you can start with a buffer or someone setting you up it is a lot easier to stay debt free than starting with nothing.

Absolutely.

As mentioned above I was bankrupt at 24. I promise you, nobody in my specific situation could have avoided that or managed financially any better with what I had available to me. In the end it was go bankrupt or start selling myself (I came very close and pulled out at the last minute). Life isn’t always easy or straightforward and I hope the people explaining how simple and common sense it is to avoid debt have struggled seriously with finances to be able to speak from experience.

@TeenMinusTests

I agree.

If you can start with a buffer or someone setting you up it is a lot easier to stay debt free than starting with nothing.

Exactly. I was lucky to attend university in the 1980s: no fees and a full grant so graduated with zero debt. I was therefore able to save money from my first job and when dh and I married we were able to live on one salary and saved the other.

I hope the people explaining how simple and common sense it is to avoid debt have struggled seriously with finances to be able to speak from experience.

I graduated university quite deep in my (interest-free) overdraft, with no income. That was my impetus to educate myself about personal finance and I can almost certainly say I wouldn't have been in that position if I had.
The real issue is that people don't even know where to start with this stuff.
I've purchased, lent and recommended the book that was foundational for me to a bunch of my friends and they all seem better off for it.
I have no doubt that some people are genuinely forced into a position of taking on debt due to entirely unforseen and unavoidable circumstances, I just don't think that's the majority.

Rather than teaching kids maths that they’ll literally never use, they should have modules on this sort of thing and their knowledge should be tested at GCSE! It would be a good topic for essays also to encourage critical thinking and so much more relevant than some of the stuff being taught.

@BigPaperBag pretty much most of the maths taught in school is needed in life...not for all ppl I know but we have to teach at a lower level for everyone so that those who go further have a good foundation. In my job I work daily with charts/graphs, data tables, significant figures, stem and leaf plots, outliers, normal distributions etc etc. I'm a microbiologist.

There's another thread active at the moment where someone has asked "if you had a bit more money each what would you spend it on?"...when I looked NOT 1 person said "oh I would save it for my rainy day find etc" I think that it shows the mentality that a lot of ppl have unfortunately.

Incredibly easy. A little bit here, a little bit there, all adds up to a big debt. I have a job where I see the bank statements of people who go bankrupt from time to time, and it’s rarely made up of big purchases. Just “general living expenses” - but if it consistently goes over what you have then it’s debt.

@BigPaperBag

Rather than teaching kids maths that they’ll literally never use, they should have modules on this sort of thing and their knowledge should be tested at GCSE! It would be a good topic for essays also to encourage critical thinking and so much more relevant than some of the stuff being taught.

Agree.

Though in terms of spending money on credit, I don't want to infantilise adults. We know what credit is, so...anyone choosing to put takeaway on the credit card knows what they're doing.

One of my friends tells me PCP will go horribly wrong for lenders but I assume they have factored that in?

@GertrudePerkinsPaperyThing

Incredibly easy. A little bit here, a little bit there, all adds up to a big debt. I have a job where I see the bank statements of people who go bankrupt from time to time, and it’s rarely made up of big purchases. Just “general living expenses” - but if it consistently goes over what you have then it’s debt.

But a lot of people think £20 hand cream is general living expenses, it clearly isn't.

^^ This. So many people talk about their finances being derailed by an 'unexpected' car repair, or because the washing machine broke, or because it was after Christmas, but the reality is that, if they have money available in their budget that they haven't put by, and instead have spent on non essentials, being short of money for car repairs or washing machines is entirely their own doing
I agree to a point, but we also have to account for the fact that not everyone has float to be able to put money on one side.
When I joined MN previously I was astounded by how many posters felt they would be falling on hard times because they didn't have 3 months of bills in savings.

It's not unreasonable for people to put a large urgent purchase on credit card, and most people would be able to get credit to do that.

The problem is when credit cards and other credit services are being used to fund general living expenses that includes take aways, more clothes etc and then when something big happens the person is stuck.

@DedlyMedally can I ask what book it was please?

When I joined MN previously I was astounded by how many posters felt they would be falling on hard times because they didn't have 3 months of bills in savings

I think that is a massive problem in society.

The question is - why?

And I suspect there are a lot of different answers - most of which have been touched on on this thread.