Are Money Problems All Caused By … Stupidity?
Debts have taken an alarming turn when you look at the world’s population. An innovative country such as Japan, for instance, has the highest national debt in the world, ranking at over 234% of its GDP. However, the Japanese population has learned to manage money matters effective, ensuring that the household debt level decreases after the stock market crash of 2011. It’s because the government has been willing to increase its national debt that households have been able to manage the financial crash safely.
However, stronger economic markets all around the world are left baffled by the increasing level of their household debts. Indeed, the Japanese population appears to be exceptionally gifted at money management, especially after having suffered a crash. On the other hand, the household debts in the United States reached over 77% of the GDP, while the British households rack over 86% of GDP in debts.
What is going wrong?
There is no straightforward answer to the question. Ultimately, it’s important to remember that money management is not an easy matter. Prices are going up everywhere, so it’s unfair to blame the population for their poor financial skills when you think that buying a house in the UK in the 1960s was around £2,530 vs £211,000 for the same property today. A similar phenomenon appears in international real estate markets, from Europe to North America. Your grandparents paid one-tenth of what you’re spending today to become a homeowner. Undoubtedly, the cost of living was different then, but even when you include price inflation, the gap is still huge.
In short, debts are unavoidable to a certain extent.
But on the other hand, another worrying observation is forcing economists to question their conclusions. The global Intelligence Quotient is falling. Indeed, IQ scores have been dropping significantly since the mid-1970s. The results show a drop of on average 7 IQ points per generation. While there is a clear distinction between the quantification of intelligence via an IQ score and real intelligence, it still leaves us with one vital question: Do we accumulate debts because we’re getting stupid? Let’s observe the situation.
You intentionally lie to yourself
Nobody enjoys drawing a budget. It can feel like putting on a pair of handcuffs to your routine. You can’t do this or that. You have to do this. It’s evident that nobody wants to live in a self-made cell. However, while budgeting is unpleasant, it serves a clear purpose, aka keeping your finances in the green. In other words, you can’t use half-believable excuses to skip the budgeting phase. Unfortunately, the main problem with our lack of budgeting is that we tend to believe the reasons we invent for ourselves.
I’d love to, but budgeting is too complicated is a non-acceptable excuse. Budgeting is not too difficult to learn. Every kindergarten child understands the principles of addition and subtraction. Are you saying a toddler is smarter than you?
Budgeting is boring is another common excuse. It’s true; budgeting is not fun. But so is working, eating your greens, and taking a shower. Does that mean we should all give up our employment, health and hygiene because it lacks excitement?
You fail to apply a strategic mind to it
We get it. Talking about money can get emotional. It is a source of worry, and also a source of joy, depending on how much you’ve got in your bank account. But just because it leads to an emotional response, it doesn’t mean you should apply psychology to your money problems.
Unfortunately, too many people approach expenses with a psyche map in mind, gravitating towards behaviours they feel comfortable with or that spark happiness, regardless of their practical value. As a result, managing debts can rapidly turn into a rollercoaster of lows and highs with no chance of escaping your financial doom. You need to make sense out of your finances, and that’s precisely where countless experts such as debt lawyers at McCarthy Law PLC start with.
Indeed, professionals who support their clients to settle debts often face the same situation: Individuals have lost their ability to plan ahead and tackle the issues the moment they gave in to their emotional distress.
You genuinely believe things will get better
We all hope for luck to turn and finally start working for us. Everybody deserves a little luck, right? Sure they do, but there is no such thing as a liquid luck potion like in Harry Potter. In the real world, getting rich through sheer luck is an extremely rare occurrence.
While you might laugh at the mention of lucky wealth, you have to be realistic. How many of us sometimes wonder what it would be like to receive an unexpectedly high amount of money? Gamblers are virtually hooked by the idea that a gain might just be waiting for them. Indeed, the most common reason being gambling debts is that people didn’t stop playing money. Why so? Because they had the conviction that things would turn around if they just carried on betting. In which world does losing become winning if you lose long enough?
You are convinced you need this to be happy
While the latest iPhone model didn’t break price records, most smartphone manufacturers are pushing their prices up rather than down. The iPhone XS starts at almost $1,000, while Samsung’s folding phone is forecast to cost nearly twice as much at a whopping $1,980. Of course, we can’t afford not to invest in everyday tech such as your phone. It serves as a phone, a computer, a fitness assistant, and so much more. But you could surely find the same functions in a cheaper model. The answer is yes, of course, you could. But that’s not the point.
The point is that everybody craves for the latest Samsung or Apple phone, and that includes you. I just need this, and then I’ll finally be the happy person depicted in the ad. And if I’m not that happy person yet, then I’ll need to buy the next missing link and embrace the next promise of happiness made by another overpriced brand.
You spend but don’t count
You know exactly how much money you’re making every month. You also keep track of your recurring invoices, such as energy and rent. But when it comes to day-to-day expenses, you tend to turn a blind eye. Why so? You shrug. Who needs to track every little invoice? You’re not the only person who refuses to track small expenses. A simple mug of coffee on the go every day before work doesn’t count, you tell yourself. But that one coffee order could rack up over $50 at the end of the month. Now if you combine your shop-bought salad for lunch, your reward doughnut on the way back home, and the fashion splurge out after a stressful day at the office, you could be facing over $500 of waste every single month. You need to start tracking those invisible expenses before they rot your finances from the inside.
One day, you’ll win the lottery, and that’s it
Everything will be better if only you could win the lottery. Did you know that most people who buy one or many lottery tickets do so with the hope that the gain could help them to address money issues? Winning seems to be the perfect answer to fix everything.
In the meantime, you delay taking your responsibilities until you can win. Unfortunately, not every player is a lucky winner, which means that you might end up ignoring your debts forever. Additionally, winning is no guarantee that your financial problems will go away. In fact, most people are unprepared for a big win. As a result, overnight millionaires are likely to lose it all, as it’s been the case of these 7 lottery winners.
But I’ve got a credit card!
Credit cards have a fantastic advantage: they allow you to delay payment. However, for a lot of enthusiastic buyers, delayed payments can accumulate until, at the end of the month, you are unable to make any payment toward your credit invoice. Because the idea is to let you spend more than you can afford at a given time, credit cards facilitate debts.
As the saying goes, out of sight, out of mind. And when you don’t have to think about paying for your purchases today, you may not consider that the money you owe doesn’t go away.
What do you know about finances?
We all know the myth of someone who’s made their fortune through smart investments. Didn’t Rockefeller make his money in oil? Perhaps you could buy some shares in the oil market. Only a small percentage of amateur investors take the time to research their options before approaching the market.
The vast majority, however, hopes for a strike of luck. Unfortunately, making money through your investment strategy or your saving plans requires dedicated research and comparison to make the right decisions at the right time.
In conclusion, it would be unfair to claim that debts are increasing because people are getting more stupid. But rash decisions can be costly, whether they are the result of lack of intelligence or lack of attention.
If you don’t take money matters seriously, you are going to struggle to maintain your budget in the green.