The human condition revolves around our ever-prevailing urges to consume, for the prickliest paradox known to man is unlimited wants and limited payslips. However, the human condition also centres on our devilishly ingenious circumventions to all of our Earthly limitations. Thus, when ancient Mesopotamian farmers yearned to acquire that which surpassed their incomes they took on interest bearing loans from merchants and officials. Debt is seen as a temporary reprieve however its dangers often surpass its benefits.
Debt problems are often pictured as something one encounters sometime around the balding heads and midlife crises, when one fails to pay of the latest mortgage installation. However, according to the ONS from April 2016 to March 2018 119 billion was financial debt, which differs from property debt as it includes things such as overdrawn current accounts, charge cards and any other personal loans. Thus a young person with no mortgage isn’t safe from falling down the debt hole.
The OBR reports that unsecured debts, the kind with no guarantor or collateral, is on the rise in the past years reversing its trends after the 2009 financial crisis. Unsurprisingly, 20-29-year olds are twice as likely to have debts that would be classed as ‘unmanageable’ compared to those older, with 14 percent of their debts worth more than six-months of their income. These kinds of debts are also more closely concentrated in those that are poorer, with those that rent falling lower on debt security than those that own houses or mortgage. Owning a house is seen as a general gauge of financial responsibility, thus those that defy the trends of the financially responsible are most certainly darting down the road to financial ruin.
We all can agree that the emotional euphoria and dopamine hit that spending money gives one is beyond comparison, it is one of the leading reasons that debt is so alluring. Everyone from the Mesopotamian farmer that eyed up a bag of dates or a university student that would simply die without that new sweater, enjoys toying with their purse strings. However, having access to credit cards today means that we don’t have think about putting our youngest sister as debt peon anymore, leading to spending much more than one earns without thinking. According to a report by Fincap, 18-24-year olds are on average in 3000 pounds of personal debt excluding their student loans of which over a third have no idea how to pay any of it back.
Debt also has costs that extend beyond your monthly payments. The interests are often higher for riskier borrowers, even hitting record highs in mid-2020. What most young credit card users aren’t aware of that using their card 30 percent over the limit or missing payments can have a huge hit on your credit score. Thus, the more irresponsible credit debt you fall in, the worse your credit score gets and the more your interest rates are, the cyclical doom of all debtors. In worst case scenarios those with high debts may have to take out more debts to make their monthly payments, often falling in the hands of loan sharks that give loans at astronomically high rates and get returns based on extortion and blackmail. Unfortunately, the costs of debts don’t stop there, as high debts will bar young people from ever qualifying for a mortgage or meeting their own saving goals.
Despite all the doom sayings, the greatest cost of debt isn’t financial, rather the stress and incomprehensible damage it does to your relationships and mental health. Research shows that people with unmanageable debt are 24 percent more likely to have a mental health score that regrettably falls in the bottom one fourth of the population. Thus, the most beneficial course of action is to educate the young of the dangers of borrowing.
All lessons of life are first learnt as children thus financial education should begin in primary years to ensure that children growing up in an age of predatory lending and financial misinformation can be advised of the right steps from the start. Additionally, the first step that young adults take into the world of debt, like making their first credit card application or getting a university loan, should come with mandatory financial advice and access to online resources. However, when all is said and done it is the youngsters themselves that must determine to live responsibly. They should be encouraged to keep track of their finances and seek to cap their spending on unnecessary items on a previously determined amount. Youngsters themselves should set up an emergency fund to which they can turn when they have unexpected costs come up rather than having to seek high interest last minute debts. And finally, youngsters must learn to save, moving past the siren songs of spending and instead set up a savings account. For while those in debt they needn’t give up their cattle or cousins anymore (most of the time) debt is still a problem and the solution start with you.
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