Generations of debt – how has society creatively dealt with money over the years?

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There’s a famous ancient quote of unknown origin about debt, that is as true now as it was 2000 years ago: “The only man who sticks closer to you in adversity than a friend is a creditor.”

Some truisms have remained immemorial when it comes to money, and one of them is the danger of debt – even then, some people are willing to take it on, and some would rather save. Some spend their money on many small objects, some spend big on one item. Some save religiously to buy a home, others use their money to ‘live life to the full’ and are happy renting.

There’s no right or wrong answer, specifically. If you asked a mortgage advisor, a bank manager and an economics lecturer for lessons to learn from past generations, you could be bankrupt within five years. You might ask a bookmaker, gambler and pawnbroker for advice, and be a millionaire within the same period of time.

History has shown that the way people treat money fluctuates, based on upbringing, advice and external forces. For example, in the 1940s it was probably hard to concern oneself too much with finances when a bomb could detonate above your home at any moment. Freedoms were curtailed by circumstance; rationing and staying strong in the face of adversity built a feeling of strength and courage that material possessions couldn’t fulfil.

Britain incurred gigantic debts, owed to the US (the last payment of £45.5m was only made in 2006), to finance the post-war effort, but in the late 1940s and 1950s personal credit was still looked on as socially unwelcome. People didn’t want to borrow, or more accurately want other people to know that they were borrowing. Borrowing was looked upon as showing weakness and an inability to manage finances. Families lived in areas of similar demographics and the level of exposure to those with different lifestyles and salaries was low.

The closest people came to informal debt was through the tallyman; traditionally associated with London’s East End, the tallyman was a debt collector who visited throughout the week to collect payments for items purchased on hire purchase. Those who lived on the ‘never never’ often led a precarious lifestyle, literally hiding from collectors when they knocked on the door.

Writing in the Guardian, Laura Marcus spoke of a turbulent upbringing in Surrey where items would disappear a week or two after purchase and security was scarce, due to the employment history of her father. She said: “I longed to be like my friends with their carpeted house, central heating and thick velvet curtains that shut the scary world out and made them feel safe, warm and cared for.” However, learning to cope with little money was one of the things she thrived upon, and would probably ponder if youngsters could do so in 2016?

At that point borrowing was frowned upon by some, but then the consumer era began. Televisions broadcasted advertised products into houses that everyone had, and that YOU needed as well. Advertising became less functional and more emotional, more people-centred and less wordy. The 1960s was advertising’s coming of age, when mass-produced goods became personalised and leisure time became more prominent in our lives.

Companies such as Provident Financial offered vouchers in exchange for goods, as a precursor to the modern credit card, which were freely in use at the end of the decade.

By the end of the 1960s debts had risen to around 40% of household income, before steadying throughout the 70s. And then the corporate, consumer-dripping 80s arrived with Thatcher and Reagan, and we borrowed to the hilt. The stock market became a play pen for people to speculate and make money and then use that money to make more money. A Time reporter once described it as “Get Rich, borrow, spend, enjoy” – some would say this still lives on. Much of the 80s was characterised by new technology such as the Sony Walkman and gigantic mobile phones, that could only be bought at a price.

So debt rose as a percentage of income consistently, from the 80s into the mid-1990s. Our attitude to debt became less cautious, especially in the noughties when banks competed against each other to offer customers loans and mortgage deals with massive LTV ratios, even when credit ratings were not impressive. Then, in the late noughties, the game was changed by the world economy suffering, and we now find ourselves in a flux of recovering, while dealing with newer issues such as Brexit.

One thing that hasn’t changed; We’ve always been a nation of homeowners. As US personal financial guru Suze Orman says: “Owning a home is a keystone of wealth – both financial affluence and emotional security.” The difficult housing market has precluded a large percentage of the UK population from doing so, as according to statistics from the Office for National Statistics, the percentage of young people aged between 15-34 living with their parents has increased from 36% in 1996 to 40% in 2015. Home owning is still something to which we aspire.

However, home ownership isn’t regarded the same way across the world. In Germany, for example, ownership has been steadily falling from 2012, and it was never particularly high anyway – around 20% lower than in the UK. It’s believed that the mindset of preferring renting to owning followed the housing crisis that arose in the aftermath of World War II. It was cheaper, the mortgage market was devastated, and there were more freedoms for the private sector to explore the property market.

Sixty years on, little has changed and the rental market remains buoyant in Germany, while in the UK we want to own; in fact, we’re desperate to own despite the world seemingly being against us. The government wants to build 200,000 homes a year to deal with the current housing crisis, but it’s believed that at least another 100,000 are really needed. Furthermore figures from the Ministry of Justice, analysed by housing charity Shelter, suggest that more than 8,300 people are at risk of losing their home each week, based on repossession.

So what has history taught us about our finances? If you asked someone who grew up in the 1940s or 50s they would probably say that having nice things in life is good, but not essential. Thinking on your feet, and having enough in the bank to live and save for financial security in later life, is the way forward. Legendary investor Warren Buffett says of saving: “Do not save what is left after spending, but spend what is left after saving.” Those who grew up in the 70s and even more so the 80s might have a very different outlook on life, encouraging risk and facing challenges, and being assertive in gaining what you want; as an example, click here.

Nowadays, we’re probably somewhere in the middle of the two. Saving up is good, but showing off things we’ve purchased on social media is good as well. Owning a home is nice but not essential, because there’s greater risk of losing it. And anyway, we have more capability to move around the world if we’re not tied down by a mortgage. We should know what we’re going to do with money before we have it, but always have a plan B, especially when world economic conditions throw a spanner in the works.

We, however, have advantages that no-one had for most of the last century. We now have the power of the internet on our side, and therefore access to vast knowledge vaults concerning banking, prediction, economics, history, and opportunities. The biggest annoyances will be when a way of saving money or making money appears, with little or no risk, and you simply didn’t know anything about it or how to accomplish it. Schemes such as ISAs and Help to Buy, alongside access to companies that can help you borrow. such as Avant Credit and others, can help you set up a business, invest or make wise financial decisions.

The final conclusion; money can buy happiness. That doesn’t necessarily mean holidays in Hawaii and a Ferrari on the driveway, but it does mean consistently paying your bills and mortgage and offering security for your family. It means peace of mind and living the life we want, by saving or spending or bingeing or selling. Debt isn’t the dirty word it once was and learning to live in different financial circumstances, caused by mistakes, good decisions and bad luck, is probably the biggest financial skill someone can possess.