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4 Things That Influence Credit Card Debt

4 Things That Influence Credit Card Debt

When faced with the urge to splurge, asking what initiated that plan to purchase puts control back in the hands of the consumer. Identifying the origins of desires helps us separate want from need, saves buyer remorse and keeps credit card debt in check!

Parents who earn more than you do

Growing up in a household where your parents earned more than you do is one of the prime risk factors for being in debt.  You probably became used to living a lifestyle that you can’t afford on your income.  It doesn’t even need to me a lot more to cause problems. A lifestyle that’s 5% above what you earn, could easily accumulate tens of thousands in debt in just a few short years couple of years.  The good news is that most people’s lifestyles aren’t that far out of wack. Generally trimming 5-10% off expenses will send the budget into the right direction again.

Related: Should you tell your kids about your debt?

External Locus of Control

‘Locos of Control’ revers to the extent that you believe you can control your life. Someone with an internal locus of control believes that he or she can influence events and outcomes, where as someone with an external locus of control blames outside forces for everything.  For example students with an internal locus of control believe that their success or failure results from their hard work and effort. Someone with an external locus of control believe that their success or failure depends on factors outside their control such as luck, fate, teachers who are unfair or prejudiced.
If you have an external locus of control your likely to believe that your debt is due to factors outside of your control like, reductions in your overtime, a short period of unemployment, illness,  an “unforeseen expense” life rego, rather than your poor money management skills.  Because you believe it’s outside of your control there’s nothing you can do to improve your situation either.

Read more about ‘Locos of Control’ on Wikipedia

Friends with normalising attitude to debt

If your friends have debt, the chances are you think credit card debt is normal.  Our network of friends, or reference group, creates powerful messages to us about what is normal.  For example, if every one of your friends smokes, you probably think that it’s normal to smoke.  Debt is exactly the same. If you’re sitting at a barbeque and everyone is talking about their credit card debt you may have the wrong reference group. Do to the internet it can be easy to change your reference group, joining up to some Facebook groups or forums with other people who are getting debt free will give you a different perspective.

Related: 5 friends who are making you broke

Value goods of social display

Putting a huge amount of value on status symbols is a risk factor for having debt.  Status symbols are a way of communicating to society how important and successful we are, a way of communicating our status.  What is a status symbol is to you will depend on your reference group. Some people will value Ferraris, others will value four wheel drives. Some people will value Prada while others will value Levis.  Eating out often, bringing fancy beer or wine and holidays can all be status symbols.

In 1900 maybe your group of reference was 100 people. It included the people in your church, the people at work a couple of friends and some family. That’s about it. Now you’ve got reference group of a billion people. We now have to deal with global celebrities showing off their status symbols.  Social media also allows for our friends to present a cultivated version of themselves to world.  All of this increases our desire for status symbols.

Related: Budget Tips: 22 Simple Ways to Spend Less

Next time you whip out the plastic for a non essential item, take a moment. Dig deep to discover what sparked that decision to identify whats driving your actions.  If the answer is linked to insecurity or acceptance, reassess the purchase and address the core issue.

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