Britain is a country with one of the highest rates of Nobel prize laureates. It’s home to some of the most prestigious universities in the world, and its capital city is a booming global finance hub. So how come British citizens are crippled by mountains of debt?
Thousands of people from around the world come to the UK to work and live. Great Britain has a reputation for being rich and free. There are a lot of foreigners who set up their businesses here.
In a word, things look great. The facade is awesome. However, if we peer behind the scenes to look at the financial situation of the average Brit, things don’t look so wonderful.
The biggest and most dangerous virus in British economics and the country’s social system is consumer debt.
Statistically, the British people are financially embarrassed and drowning in debt.
A staggering 70% of the UK’s working population are “chronically broke, with many falling into credit card debt for everyday spending.”
Only one paycheck separates 8 million people in the UK from homelessness.
“The Insolvency Service has announced that 99,196 people were declared insolvent in 2017.”
To be fair, I must admit that this is not specifically a British problem. The Americans have even more debt issues. Europeans are sinking in oceans of debt, too. Some says that the Germans are different as they show aversion to debt and are more keen to save and avoid buying things on credit. However, the German lifestyle in the 21st century is very similar to any other developed, capitalist country.
Why does this happen? Why have we all agreed to live on credit? I have been working in personal finance management for over 10 years and I’ve had a lot opportunities to dig deep into human mentality to examine our patterns of thinking, behaviours and the decisions we make based on them. This is what I have found.
Let me present 6 reasons why Brits are sinking in debt. Note that although the first four points might look similar at first glance, they are actually quite different and deserve their own special attention.
1. British people pursue happiness
You cannot be good with money if your essential life goal is to pursue happiness. Happiness costs a lot of money, and even if you spend all the money you have, you might be still unhappy. Pursuing happiness is an equal hopeless task as making an effort to discover the mythological philosopher’s stone.
Pursuing happiness has become a very profitable business for thousands of life coaches, private psychologists, book authors and seminar speakers.
The problem with chasing happiness is that it is a Sisyphean task. You are simply not able to achieve it in this world, even if you have the impression that you are so close to the goal.
It is so much better to pursue a meaningful and purposeful life. A productive life. A life that contributes to other people’s lives.
2. British people constitute a classical consumer society
As Noam Chomsky stated, “It’s been a real success — one of the great business successes in the United States [and certainly in the UK] — to break down organization, to separate people too: it’s part of consumerism. If you can drive people toward individual consumption, that’s the highest goal in life. And furthermore, drive them into debt so they’re trapped. You don’t have to worry about a democracy functioning, because people are trapped and they’re alone.”
Consumerism is a major power in British society. It means that who you are depends on how much do you buy. How on earth can you develop a financial IQ living with such a worldview?
Life is about so much more than pleasure, instant gratification, rewards and leisure time. Life is about creativity, work ethics and making rational, meaningful decisions — including those relating to your finances.
3. British people are trapped in an obsession with social position
If you think that your value depends on your material possessions, then you will certainly develop a very dangerous disease: ‘status anxiety,’ to use a very accurate term coined by Alain de Botton. We judge others by their social and professional positions- and think that we are equally judged by others according to the same criteria! Status anxiety is characterised by assuming that if you are not being constantly promoted, don’t live in a impressive house, don’t drive a luxury car and don’t spend holidays in fashionable places, you don’t deserve any respect.
Could it be this is why the British society is a paradise for bankers and money lenders?
There is nothing wrong with taking care of your social position. However, it should a positive motivator, not a toxic one.
4. British people are drifting more and more towards decadence
Decadence is defined by a lack of values. Even having a high social status, having the power to buy whatever you like, is no longer enough. You have consumed so much that you feel overdosed.
At this stage it might be too late to understand the real point of life. If you have no values, you have no life goals. You don’t pursue anything. The only thing you are motivated to do is to find new pleasures- at any cost.
The only way to get rid of decadence is to redefine what pleasure is by deeply transforming your life.
5. British people believe that companies are there to help them
Because of the power of marketing, you might think that companies don’t really sell anything; rather they give you something. Companies produce things that make you happy. They offer you fantastic solutions for your imagined problems. They care about your feelings. They want you to feel great about yourself. In a word, they want you to live in paradise- in exchange, of course, for your credit card number or a regular direct debit.
“Let me say this loud and clear at the start,” writes Martin Lewis in his excellent book ‘The Three Most Important Lessons You’ve Never Been Taught’: “Know your enemy — a company is not your friend. It is the single most important thing I’ll say in this whole guide. If you don’t understand it, you’ve lost before you’ve even started. Now don’t think this means I’m anti-company; I’m not. I don’t think they do anything wrong. This is simply a function of how our society works. My problem isn’t that their job is to make money; my problem is that most people don’t understand this and think instead that businesses are there to help and assist with daily life. Of course, some companies give a great service, but that’s just part of making money.”
There is only one person who can really help you achieve your financial goals. Yes, you probably guessed. It’s you!
6. British people need to borrow more and more to maintain the same level of life
There is also another serious problem. You may have heard many times about how great our western civilisation is and how we have grown throughout the last couple of centuries. Not really. Does it matter that Elon Musk wants us to colonize Mars, or that aeroplanes are becoming faster and faster, if our salary has been stagnant for decades? Very often you must borrow money to maintain the same level of life (or rather the same level of consumption).
The real beneficiaries of progress are mostly financial institutions. And all the while, the rest of us are getting poorer. In his very interesting lecture “Profiting Without Producing: How Finance Exploits Us All,” Costas Lapavitsas explains how this happened.
Even if you think that you are rich because you use a lot of stuff, you are probably totally broke anyway, because your wealth should be measured by its net worth. Presumably, your expensive goodies and your impressive lifestyle are credited to a bank.
So what is the solution?
There are people who advocate simple living movements, which would be interesting if they were not frankly a bit weird and detrimental.
The problem with these kinds of ideologies is that they exist only by negation and protest against the status quo.
They have developed as a rejection of mainstream lifestyle.
In general, it makes sense to experiment with simple living or with stuffocation and experientialism.
However, I personally believe that only financial literacy, which is a result of financial education, can protect us from financial disaster and misfortune in life. It can also free us from sophisticated forms of marketing and advertising manipulation. It is interesting how financial literacy is a close ally of media literacy!
A good understanding of money can protect you from those who seek to exploit you, even if they claim they want to help you and make you happy.
Financial education should be the foundation of family finance planning. It should, therefore, “be taught and encouraged both as an essential component of the school curriculum, and any other educational or social organisation around the world.”
Do you like this idea? Then join The Financial Manifesto!
This article was written by Andrzej Manka, author of 100 essential questions and answers about your personal finance and business