Who doesn’t love going out and spending money? ‘Retail therapy’ has been a long held comforting tradition for many when our emotional barometer hits stormy waters.
Our love of shopping and living beyond our means has now become a way of life for many Australians, with Australia’s credit card bill reaching an all time high.
According to a recent report by The Reserve Bank of Australia, our credit card debt is at the record level of $44 billion. These figures also show that the national credit card debt average is more than $3200 per person.
Seven in ten adult Australians have a credit card. One in six of those have more than three credit cards. The GEC, unemployment and spiralling living costs force many Australians to put everyday expenses and even mortgage repayments on plastic, according to The Reserve Bank. Many individuals and families struggle to pay back not one or two credit cards, but three or four in some cases.
This is confirmed by Professor Michael Kyrios who has conducted research into compulsive shopping recently through Swinburne University. “Our society as a whole is far more materialistic and our young people, such as Gen Y’s, have been brought on ramped consumerism. They now have money to burn and are spending big. They can afford to spend this way for the time being but time will tell if it becomes a real problem for them later on.”
For Simone, a 22 year old working in marketing in Brisbane, keeping up with the latest fashion is a major lifestyle priority. “If you don’t spend your money now, when will you? Gen Y are moving out of home much later, so we are spending our money while we can. I don’t want to be a 60 year old with a great outfit – who will look at me then? I want to be a 20 year old with a great outfit.” Simone does have a credit card of $2000 but she manages to keep that under her limit. Simone spends all her money on clothes and admits she has no savings and is prone to overspending. Her average spend each week is $400 and this includes clothes and socialising with friends. “We have placed a lot of value and importance on education and this will carry us through. I know I will have the cash flow later, as I intend to make big money in my career. Even though I have blown my budget this week and am already in debt , I’m seriously considering going back to buy those $120 pants I saw yesterday. I consider buying clothes investment pieces really. My clothes are my children.“
Overstimulation of movies such as Sex in The City, reality TV shows and the growing plethora of luxury lifestyle magazines continue to drive the standards up for women. We have adopted is a definite ‘spend now’ pay later culture.
The point of difference according to Professor Kyrios is that an ‘over spender’ can regulate her spending and is motivated by prestige, where as a ‘compulsive shopper’ cannot and this stems from self esteem issues and childhood trauma. Compulsive spending disorders are treated with psychological therapy, whereas over spending can be assisted with financial counselling. Real compulsive shopping behaviour will not usually become evident till a person is usually at least 30, so Professor Kyrios believes we are only now on the brink of seeing the affects their overspending will have on Gen Y.
Professor David Kavanagh from QUT says that it is natural that people get pleasure from shopping. It only becomes a problem, when it starts affecting other areas in your life because you keep spending money you don’t have. “Even though you are stressed because you can’t pay your credit card bill this month, you still go out shopping and put more purchases on there. Typically a person will recognise they have a problem but will still continue to spend. This is where shopping addiction spirals,” he says.
Jillian Fletcher a Financial Counsellor with Lifeline Community feels it is not surprising that young women are prone to more credit card debt as they have had access to credit for a longer period of time, comparative to their ages. “Often young people have not had to save for things like older generations have. This can lead to a false sense of what value money has. Gen Y are also much more vulnerable to marketing because of this.”
Jillian works with people under desperate financial difficulty and her experience has found that this problem affects individuals of all ages. Lifeline assists in educating people about their personal finances. Jillian says often people use their credit cards for a holiday for example and think they will be able to manage the debt easily. When they return home however other urgent unexpected expenses arise. They increase the balance of their credit card and their debt begins to spiral.
The other significant area for concern according to Jillian is people falling into ‘interest free terms’ arrangements, when they can’t afford it. They expect to be able to pay the debt off and then can’t by the required date. “What consumers don’t realise is that they get charged interest from the very first day of that $5000 purchase, two years earlier. This particular person for example already had five or six credit cards, a personal loan of $20 000, as well as a mortgage. They also may have borrowed against equity in their home which is okay when the housing market is booming but not when the market turns. They are soon in serious financial risk. Debt consolidation loans can help people with more affordable repayments but unless they change their behaviour, they simple end up racking up debt again on their credit cards and still paying their $20 000 consolidation loan off. I have counselled one man who had a credit card debt of $120 000. I also counselled a retired couple who soon were in $70 000 worth of credit card debt. It happens very quickly unfortunately.”
Jillian admits a simple first step when shopping to avoid the debt trap is to remember that ‘Cash is king’. Professor Kyrios concurs, saying, “Trying to get happiness from shopping is never going to work. As a society we need to move away from this over emphasis on mass consumerism and avoid debt as much as you can. We need to adopt the life style live of the ancient Greeks ‘everything in moderation,’ he says.
Shopping addiction is like any addictive behaviour, it is largely controlled by imagery says Professor Kavanagh. “If you are thinking all day about the perfume counter at DJ’s, what you will buy there, how you will smell, your big smile and the excitement you will feel for example, you really have to divert your thinking to other areas before this behaviour will change.”
Some practical suggestions to avoid over spending:
•Become more engrossed in your work. Working on a task where you have to concentrate fully, instead of one that allows you to fantasise and visualise.
•Telling yourself ‘not to think’ about shopping won’t work. You need to replace your thinking with something more interesting.
•Become involved in other activities that give you pleasure will be a great help. Instead of going shopping at lunch time for example, do something else you really enjoy like walking in the park. If you can get yourself over this period of risk, it will allow you to gain control back in your life.
What are your thoughts?
Should Gen Y be labelled ‘Generation Debt?’ Are young women in particular vulnerable to over spending? Do you think we are a society of overspenders? How prone are you to bouts of retail therapy? Do you worry about your level of debt?