Personal Debt.

DebtThis topic has been suggested by me for the weekly Friday Loose Bloggers Consortium where currently six of us write on the same topic every Friday.  I hope that you enjoy my contribution to that effort.  The five other bloggers who write regularly are, in alphabetical order,  AshokgaelikaaMaxi, and Shackman and The Old Fossil. Do drop in on their blogs and see what their take is on this week’s topic. Since some of them may post late, or not at all this week, do give some allowance for that too!

When I suggested this topic there was a young mentee who was fighting to gain control of an enterprise that she had unwittingly got into in partnership with some others who had not put in any equity but had promised to bring in management and administration inputs which they failed to provide. My mentee had got into debt in her individual capacity and the business had to generate enough surplus to enable her to pay off those debts as well as finance her gaining control of the business by buying out her partners.

At the same time, I was also involved in the problems of a friend whose son had got into very serious debt problems buying a flat, furniture, car etc and also got into financial settlement, alimony etc in a messy divorce case.

So, the topic was on top of my mind and subsequent information that I received from other sources about other individuals with similar stories, has only firmed up my conviction that this is a major problem facing our youth today due to one single fact, instant gratification.

Among other pieces of information that I came across was the shocking revelation that many student loans are not repaid and the institutions that had guaranteed the loans stood to make good the losses incurred by the banks who had advanced the loans.  And this about some very famous and leading institutions of higher education and some of the names that were bandied about in the conference that I attended were simply staggering.

I also hear about professional collectors making life miserable for defaulters including causing  physical harm to the borrowers and wonder if our society will become like what we used to read about loan sharks and their baseball bats!  Since banks are the lenders, they hire these very respectable collection agencies who however indulge in very dubious methods to collect.

The individual lender/borrower equations like I wrote about seems to be not such a big problem now that we have banks falling over each other to entice young people to borrow from them and we also have what are called Micro Finance Banks who are replacing the traditional local money lender in many parts of the country.  There are so many institutions willing to lend to individuals, often without collateral, but also for hire purchase, the debt burden seems to be increasing.  Enjoy now pay later is the motto currently in vogue.

I personally am debt free today as is my son and daughter in law and that is a feeling not quite shared by many of my friends whose children are overburdened by debt and often depend on their parents to help them out during emergencies.

I would rather live in those good old days when consumer lending was not in style and when we had to save up to buy anything and any borrowing was from family and friends.  The younger generation here of course thinks that I am a relic who belongs in some museum somewhere.

What do you think?

19 thoughts on “Personal Debt.”

    1. Jean, I do not wish to hurt or be tactless. However, it’s very easy to live as you call it “happily below our means” when you have the means.

      Ursula recently posted..Gender

  1. Modern marketing with the mantra: ‘You only live once, so enjoy now and pay later’ – has a big part to play in this modern situation. I grew up saving my pennies for what I wanted. The joy was twofold: a) the sense of achievement at reaching my goal and b) having the item in my possession. Mind you, we were not bombarded with the modern advertising or peer pressure, to be seen with the latest ‘must have’!
    Grannymar recently posted..Thursday Special ~ Don’t distract the driver….

  2. I don’t agree with you about youngsters in general.

    I very much believe that the way we (earn and) spend money/how much risk we take investing is down to everyone’s character/personality/makeup. Today, thousands of years ago. Within the same family (my maternal grandparents’), one I observed closely as a child, there were the savers, there was the one with a twinkle in his eye who made it appear effortless to make money stretch to the hilt and then there was the reckless one. The gambler. I do not know where I fit on the spectrum.

    The Angel should, by rights, be an accountant. He is a saver. He lives by a budget. He draws up budgets for his friends (and his mother). He declines all his bank’s offers of an overdraft. Any enticing lure to get a credit card he throws into the bin (unopened). He is not one for “instant gratification”. Quite the opposite. Either he can pay for whatever he fancies (which is little) or he’ll wait. Don’t get me wrong: He is no miser but he knows what’s what. He has sworn, is determined that he’ll never be is a debtor. I think it commendable. And it’ll save him many a sleepless night.

    I myself? I do not have such qualms. Mainly because I don’t have a choice. I fell from a height. Now I have to scrape my remnants off the tarmac. Yes, I know I could have married riches and/or sat on someone’s pension. It’s not my style. I fight my own battles.

    Which reminds me: Can you lend me a fiver?

    Ursula recently posted..Gender

  3. I don’t know what to think. Is it that such people don’t see that they have to save for a rainy day? Let alone dig a blackhole of debt. I don’t think I’m financially astute, but surely one can see where one is heading. if it is getting difficult to balance your account at the end of the month. There is a book called “Enough” which may help in looking at modern lifestyles with a mix of horror and shame.
    srinivas recently posted..Do we need any manager at all?

  4. I think circumstances have changed dramatically during my lifetime. When I was young, it was easier to pay your way without debts. University courses were free, houses were a lot cheaper, rents were much lower, salaries were higher. For a lot of people, there was no need to get into debt.

    Nowadays everything the young aspire to is more expensive and salaries have been squeezed right down. Lots of them are unemployed, on zero-hours contracts or can only find part-time jobs. It’s hardly surprising that many of them fall into debt and are unable to pay back their student loans.

    It’s easy to be smug and self-righteous about our own more fortunate progress through life, but many young people probably find themselves in debt despite every attempt to stay solvent. And once debt starts piling up, it can rapidly get out of control.
    nick recently posted..Spying fever

    1. That is the point Nick. Getting loans was not easy when we were young and most of us did not go through what these youngsters go through now. It is also true that higher education now costs much more than it did in our times.

  5. much of the debt that comes to many, seems to be the latest gadget…I’ve forgotten which smartphone number we are up to…but as soon as they hit the streets “one needs one” apparently insurance companies get a lot of claims for damage, loss etc at this time…(I have old fliptop does minor things, is just enuff)

    then there are the “loan companies, banks & credit cards – it’s a business all of them, have to make profits even if we don’t want them tool…

    recently I was asking the gov’t folk about doing a budget and one of the younger lassies in the office said “surely you know how to budget?” and I replied “yes, but making it all balance is the problem…”

    that wasn’t the main reason I wanted them to do me a budget…but for the answer that was enough! I can make the ends me, I just wanted to prove something to them!!!
    Cathy in NZ recently posted..Queenstown, South Island

      1. This last weekend, and it’s still not solved a major power outage…entertaining to listen to folk who couldn’t use their electronic tills, their machines that cook food, make coffee, freeze food and then some other things…the loss of business $$ was the forefront. Yes, I feel for them but what is wrong with “cash” and adding up – or thinking out of the box how fix everything else 🙂
        Cathy in NZ recently posted..Queenstown, South Island

  6. Here is another perspective. 15 years ago I am a saver. My savings renovate my house, fund my marriage, pay off a large trading loss and fund life from scratch in a new city. And then someone discovered my credit worthiness. Once someone was willing to lend me large sums of money, I stop saving.. I am not financially astute. I cannot save to invest. So I invest and force the saving upon myself. Crucial difference is investing in lasting appreciating assets, as against consumables/ gadgets. 2 years back I am completely debt free. I feel weird. So I take on another loan, buy another asset. I enjoy the race of taking his money when I need it and paying it off as soon as I can, so the interest does’nt cripple me. Leverage is good so long as the money earns you more than you pay out. Given a common starting point, no paradigm shift in fortunes is possible in one life time, without debt. It’s the case all through history.
    Ps: Also, when you borrow a million, its your problem. When you borrow a billion, its the bank’s problem 😀

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