Sad? Spend! Happy! Sad
Next time you get home and see your partner has bought a new iphone or leather jacket even though times are tight, don’t be surprised to hear that the reason for the impulsive behaviour was stress, anxiety or depression.
In a recent survey more than half those polled gave one of these as the cause of their actions.
Granted, this survey was in The Washington Post, covering an area in which most people work in the federal government under US president Donald Trump. The Americans I have met over the years are often driven, highly strung people — even in happier times. But we can see our own attitudes in this survey of 1,000 people by Credit Karma, a credit-scoring business. For example, 23% of respondents say they have maxed out a credit card in the past year. I doubt the SA experience is much better. It also says nearly half the respondents say their personal finances are one of the primary reasons they are stressed out. In SA I expect that is closer to 90%. And 38% of respondents are dealing with anxiety, anger and depression. SA would have a similar number, if the denial were stripped out.
Stress spending is seen as a shortterm solution, like drinking coffee to calm you down — only the caffeine just makes you more jittery and anxious. Like an addiction, there is gratification at first — but what Americans call crummy feelings almost always return, and may be even worse once you’ve added the “surprise” credit-card charge to the mix.
A Stanford University study says 6% of the US population suffers from a compulsive overshopping disorder. There is even a clinic, the Shulman Centre, which treats the disorder, alongside kleptomania and hoarding. I suspect there is nothing quite like it in SA. At least here, there are some signs that people are managing their debts better. The Experian consumer credit default index indicates a decline in first-time defaulting debt balances, from 3.78% to 3.44%. Simon Russell, who runs Experian SA, says there have been more stringent lending practices by credit providers and some decline in interest rates to consumers.
Russell says the best-performing segment in Experian’s universe has been the “would-be wealth” crowd of young, aspirational families who have moved into popular suburbs to which their parents would never have had access. Their parents would also have been unlikely to have access to mortgages or credit cards. A year ago this sector had a default rate close to double the national average — it is now little over average.
Inequality still increasing
Another sector doing well is “city convenience” — those who live in and often rent small apartments in city centres. This sector had the second-best improvement.
Sadly inequality is still increasing, as shown by poor township families having a 7.93% default rate, with 11.52% for personal loans and 11.87% for credit cards.
I am not sure what the banks expect, as the average income of those in this sector is barely R3,000/month.
Experian has come up with some intriguing names. “Midlife cruisers” sounds like an Al Pacino film, but it refers to highly educated, wealthy individuals on exclusive estates. I assume all the cruising takes place on yachts. With a strong JSE and low interest rates, it is no surprise they are doing well.
I hadn’t appreciated quite how much defaults vary by product. Experian says home loans have a 1.72% default rate, vehicle loans are next, at 3.02%, and then there’s a jump to 6.75% for credit cards and 8.42% for personal loans.
Stress spending is seen as a short-term solution, like drinking coffee to calm you down