Episode 1. The Problem with Debt
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Most people are carrying some sort of debt – a mortgage, perhaps a credit card or two or three or … In fact, it seems that the wealthier a nation becomes, the more its people are in debt. On the …
Most people are carrying some sort of debt – a mortgage, perhaps a credit card or two or three or … In fact, it seems that the wealthier a nation becomes, the more its people are in debt. On the one hand, debt is a fact of life. On the other … people are drowning in it.
We’re continuing on this week by taking a good hard look at money, how we earn it, what we do with it, how we spend it and the impact it has on our lives. But from a slightly different perspective to what we’ve been doing over the last couple of weeks with Rick Dunham. This week and next week on the program I’m joined by Ross Buttenshaw.
Now Ross is the Australian director of an organisation founded in the UK called Christians Against Poverty or CAP as it’s known for short. And what he and his team do is they help people who are struggling with their finances. So he lives on the coal face if you like of managing finances and he sees the reality of problems people have and how they struggle with money.
So this week and next week Ross is going to give us a hands on practical guide to managing our money right into the practical realities, the things that bring people unstuck and the things that you and I can do to become effective money managers and stewards of what Gods placed into our hands. And today we’re kicking off with a look at the subject that most people are all too familiar with, that subject is debt.
Berni: Ross welcome to the program.
Ross: Hi Berni, how are you?
Berni: Good, good. Now it strikes me that debt is something of a four letter word and it seems crazy in a world that has never had more wealth and resources globally that we should be sitting here talking about debt. Is debt really such a big problem?
Ross: Debt is a major problem and you’re right, I think it is quite a recent thing, I’d say in the last fifty years there’s been an explosion of debt throughout the world and things that explode so quickly so often carry with them issues which are relatively new and undealt with. Sixty years ago we wouldn’t have had to have this conversation about debt.
Berni: The statistics are pretty horrendous aren’t they?
Ross: Yeah absolutely.
Berni: What do they look like?
Ross: Well if you look at Australians particularly 1.3 million Australians live in households that spend more than half their income on debt repayments. That’s just in some recent survey last year. Also 75% of Australians worry about their ability to pay their bills. A recent survey also shows that 40% of respondents said that children had been absent from school because they couldn’t afford schooling associated costs.
Berni: And this is in such a wealthy nation.
Ross: Exactly, Australia is definitely one of the better off nations in the world.
Berni: Why is this, I mean what’s changed since our parents were young, what’s happened?
Ross: Well there’s no doubt there has been an explosion of debt. As the world economies grow, the banking industry is developed to a point where the debt that we carry is actually fuelling a lot of our consumption and, I mean I personally believe we’ve come to rely on this. If we were to close off all our ways of getting credit right now the world economy would spin out of control.
Berni: So if we closed down everyone’s credit card we’d be in serious trouble?
Ross: We would be because it’s that fluidity of cash that’s available, or we call it cash, to purchase things so we have created an economy that really does rely on this.
Berni: I’m old enough to remember when consumer credit cards were first introduced to Australia. 9th of October 1974 was the date when bankcards were first introduced and that had a huge impact on the way people behaved because you could buy using tomorrows income.
Ross: Exactly and I think it would have been an unknown concept at the time and something that would have been gradually introduced. I remember the old bankcard as well, of course I was three at the time you’re talking about. (Both Laugh)
Berni: Thank you very much Ross. And so how has our attitudes towards money and debt changed over the past few decades because I think back to my parents who were post World War 2 immigrants to Australia and they still have quite a different attitude to money than perhaps my generation and my children’s generation?
Ross: Well in the past we used to save for things and I know I’m the same. My parents tell me stories, the older generation say they couldn’t buy things unless they saved for them. We definitely have an attitude these days of ‘if we need it we buy it’. And that’s come from this ingrained culture that even our kids are brought up with now that credit cards are almost something that everyone has, even my own son. We have a way of doing our own budget and we sort of used up our budget for the week and we’ll talk a bit about this later. When I said we couldn’t go get a DVD and pizza that night he was like, ‘Well can’t you use your credit card dad?’ This is a boy in year 7 and so even our kids have got that credit mentality before they even have money.
Berni: And you can buy the computer or the lounge suite or the whatever with no further payments until sort of 2053 and you’ve used up tomorrows income.
Ross: That’s right and people argue that it’s definitely increased our standard of life and it has but the old question about what cost and how much are we spending our future income on, what we want now?
Berni: If you had to point to one thing that causes people to get into debt above their heads what would that be? Why do we do that?
Ross: I would suspect it’s the expectations of society. So our society expects us to have the nice car and everyone to have a house that’s a nice house and to have these things in our lives which show where we stand in society. And some would argue it’s our consumeristic and materialistic society that’s really driving that need to have things which don’t necessarily bring happiness.
Berni: Don’t they?
Ross: No! And I mean most people would agree that the things in our life don’t really bring happiness if they were to look deeper. But it does feel good at the time.
Berni: And we’re addicted to it aren’t we? We’re kind of, people want to have their three plasma screens or whatever it is and their computer network and the whole thing.
Ross: Yeah I definitely think it’s an expectation that’s been created that this is what our standard demands in society.
Berni: Now you’re a Christian, you’re a director of ‘Christians Against Poverty’ here in Australia, let me ask you a question, is debt a Biblical concept? Is there such a thing as good debt in Gods eyes? Is it perfectly acceptable to have a mortgage for instance or is all debt bad? How do you look at that?
Ross: Well that’s a good question. I don’t know if I can fully justify my belief Biblically. The Bible does talk about usury which I come to believe is the extortionate interest charged. And the Bible does talk about different forms of lending people money and so on. But in Biblical times I believe that money was lent into business and helping to create profit and so on or money was lent to the poor but was not expected to be repaid in maybe the way we see today. But I don’t think the concept of lending money just to purchase consumer goods was a Biblical concept at all.
Berni: But I guess its a problem that’s happened because of the society we live in. You look back in Biblical times and they didn’t have credit cards, they didn’t have an American Express card, they didn’t have plasma TV’s to buy and so it’s kind of created by the circumstances in which we live.
Ross: Exactly. Even in Biblical times there was forms of debt, of course there was but we have definitely taken it to the extreme and it’s a growth mentality. We have grown, we’ve got new products. I would say that the expansion of our societies economy is largely based on the availability of credit even to the business sense, you know to grow our businesses and we are in a society that demands growth.
Berni: And we demand instant gratification which again works really well with debt and credit cards. Now that’s fantastic, tomorrow we’re going to chat a bit more about the Biblical perspective on stewardship, managing our money effectively so I’ll catch you again tomorrow.
Ross: Thanks Berni, look forward to seeing you tomorrow.
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