Why most of people are in debt?

Last week, a very good friend of mine called me sounding very disturbed. He confided to me that he just received a call from a person claiming to be a “police officer” and he was being asked to go and meet him in their office. It turned out to be that my friend has over P50,000.00 (principal) in credit card debt couple of years ago. This kind of situation is not something new to me and I bet there are a lot of Filipinos out there that may be on the same boat, so to speak.

So one may ask, why most of us are in debt? I really don’t have a specific answer. But I suspect that with the so many liberal credit card issuers and/or financing/ lending companies that are giving “promos”, pre-approved”, “easy-loan” and sometimes so aggressive that they literally “entice us to make that loan” or “make that purchase” is one of the major culprits. The ease of getting credit or loan makes people feel that they have power and control. With the several freebies and reward points, consumers are made to feel guilty for not using credit or for not having a credit card at all.

This is like the “sale madness” we have practically all-year round. Although this is good for the economy because of the increase in consumer spending, but at the end of the day it could have a whiplash if there will also be an increase in delinquency and past dues. No wonder everyday, our interest rates and penalties are getting higher and our courts are full with BP 22 (bouncing checks), sum of money and collection cases.

If you are still wondering why most consumers are in debt, here are some of the “most common causes of debt problems”:

(1) Unrealistic lifestyle, not knowing the difference between needs and wants

(2) Easy access to credit

(3) Too many credit cards or store cards

(4) Overspending, not having the income to support wants

(5) Not paying off loans before getting new things

(6) Insecurity, feeling a need to have what others has

(7) Misplaced parental love for our children's wants and giving in to them

(8) Loss of job and income

(9) Changes in family, e.g., new child

(10) Not having money set aside for an emergency.

In his book, Debt-Free Living: How to Get Out of Debt by Larry Burkett, he identified three (3) personal “bad” traits that could lead to debt problems: First is ignorance. The ignorance here refers to a lack of understanding about the true nature of his/her financial situation, and sometimes a kind of "living in a dream world" approach to financial matters. False perceptions of what can be handled can get us in trouble, especially during big spending times such as Christmas. Second is indulgence. In

dulgence must obviously be one of the worse downfalls of a "fast food" society that believes they should always "have it your way" and "get it in thirty minutes or less." We have trained ourselves not to wait if we don't have to, and we often and easily give in to the need for immediate gratification. And third,

poor planning. Poor financial planning can lead to overspending and deeper debt. People should take responsibility for their own financial affairs. People fail to plan because they may feel they do not have enough income or financial assets to consider planning or they have the tendency to procrastinate.

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