Profile of overindebted people in belgium

First of all we need to make a difference between having debts and having poverty risk because those two are not the same.

When you look at the poverty risk, you can see that in 2014, 15.5% of the people in Belgium had a poverty risk. You can also see that women have a higher poverty risk than men. And that the poverty risk mostly is situated between the age of 16 and 24, which means that students and people who just enter the work floor are most likely to become poor (followed by children).

When we look at the composition of families we see that single parents with a dependent child, are facing the most problems according poverty risk. (FOD Economie, KMO, Middenstand en Energie, 2015)

Secondly, we are going to focus on people who have debt.

Singles with or without children
Today, couples will divorce faster than a few decades ago. 36.9% of those single parent families have a poverty risk. When taking a closer look at the incomes, we see that there is a significant difference between the income of men and women. The median of the income of men increases with 5%, the median of the income of women decreases with 18.8%.

In Flanders, there are 45% singles who ask for help concerning debts and next to them there are 17% single  parents who ask for help.

But we need to pay attention that we don’t see single (parent)s as people who have to coop with financial problems. They are more vulnerable because only one person carries all the costs and when they have problems they have to find solutions on their own to pay of their debts.

Singles and single parents have certain risks in common, they have to live of one income. A lot of social activities go ahead with costs: hobbies of children, going out, cheaper supermarkets focus on products in ‘family pack’…

But there are also a few differences.

First of all, when does someone count as a single parent? This happens when 1 person lives alone and has the responsibility of one or more children. This could be co-parenting or full custody.

Those families have to survive with a very limited budget. And next to that, they have to raise their children alone. 9 out of 10 families with single parents nurture their child(ren) alone, because they want to save costs by not taking their child(ren) to a nursery. But nowadays, their limited income does not differ very much from the money they get when they do not work. This makes it sometimes more ‘comfortable’ to live as an unemployed. So the minimum wages need to rise thus that it is worthwhile to go to work and earn money.

It is very important to prevent children suffering from a financial difficult situation. The lack of money may not interfere with the possibility of good education. This is why a lot of the household budget goes to the children (for example parents give a certain amount of money to the children every month to let them manage their ‘own’ money if possible).

The problem in those families may be that there is a creation of compensation behaviour. This means when parents have debts, they don’t want to let others know about their situation. In our society, everyone has the latest new products. So when you don’t have them, you don’t fit in. But a lot of those families cannot afford those new products. So the example I gave of giving the children a little amount of money is not always possible which causes frustrations.

When we take a closer look we see that single female parents without income need an extra positive stimulant to go to work. Certainly those who don’t have a lot of working experience, are administrative very weak and live in bad conditions. Single male parents often have alimentation problems (Vlaams Centrum Schuldenlast, 2011).

Former prisoners
They are separated from life in society for a while. This has an impact on different areas of life, including the financial situation.

‘Habitants of prisons’ consist mainly of socially vulnerable groups. They already had a lot of problems before their imprisonment. Most of them aren’t able to improve their social-economic situation. Most of the time, they have a lower education degree and limited labour experience which makes it very difficult to climb the social ladder.

In several cases prisoners enter the prison with financial debts. Besides that, the imprisonment makes them even poorer. They lose their income and the conviction comes with a lot of additional costs (e.g. a lawyer). When the prisoner and his family already have financial debts, there is an extra risk for poverty.

Possible solution: prison labour. But it is not that easy in real life, the demand will often transcend the offer and the hourly wages are very low which makes it difficult to pay of their debts (Vlaams Centrum Schuldenlast, 2011).

The immigrant population
Every culture has its own habits and expectations, including money.

The ‘financial culture’ from immigrant communities differs from ours. Sometimes it is considered unusual to take on a loan from banks. In some Islamic families, it’s a habit to loan from family and friends instead of going to a bank. A second type of loan in this community is a loan at a shop. This enables families to buy food, even if they don’t have the right budget at that time. This system relies upon trust. The owner of the shop has a list with who has to pay and how many. You can see it as an emotional loan. They put themselves in a vulnerable position against their friends and family. Because when they don’t pay the amount of money back, this causes tensions in their environment. But there is a difference in noticeable at the third and fourth generation immigrants, where more youth finds its way to the bank to take on a loan.

But this can cause difficulties:

-         Language problem can cause difficulties in understanding contracts and the complex content of some documents. If certain official letters are difficult to comprehend, we can’t expect them to understand the letters.

-         Cultural bias can be a base of certain uncertainties which have an influence on financial problems (e.g. a dentist, our water- and energy system…). Also the immigrants aren’t very open about their financial situation.

-         Some specific problems, including the systematic sending of money to a family in the home country which needs help.

The thing that is very notable is that those families can survive with less money than an average ‘client’. First of all, because of the solidarity of friends and family and secondly because of the taboo that is created about debt in those families. Those families don’t have difficulties with their primary needs, but with other costs like medical costs.

To help those people, the Flemish agency for debt is investigating the causes of their debt. It wants to include the theme of budgeting, contracts and administration in a course which learns them something more about our culture. They want involve organisations which take care of those people in preventive actions. (Vlaams Centrum Schuldenlast, 2011)

(Former) self-employed
Every year about 1/3 of the self-employed are situated beneath the poverty line. This doesn’t mean they live in poverty. The income of a self- employed can differ from one year to another. Of course, when you are several years below the poverty line, it’s very likely to end up in poverty.

In our society we see a self-employed as an image of wealth. But poor self-employed live often isolated because they want to hide their problems. They see the bankruptcy of their business as a personal failure. This state of mind is very different from some other countries where a bankruptcy isn’t always seen as a  failure but more as on of many attempts to become successful. (Vlaams Centrum Schuldenlast, 2011)

Retirees
In our society, ½ thinks they don’t have enough money to live and 2/3 worries about the amount of money which includes their pension. There is also a fear about the deterioration of the living conditions. The retirement age is seen as a difficult age, because there may occur health problems which means more expenses.

For those people the commercial world is difficult to understand, which makes it a lot easier to persuade them to go from one credit to another. Besides that, a lot of the elderly have difficulties with estimating the value of the ‘new’ euro (before: BEF).

They often have a pension which is way lower than their income during their career. So there is a contradiction: there is more spare time and less resources. This can cause chances in their life.

Another important aspect is that they feel ashamed about their financial difficulties and therefore don’t ask for help. This can lead to loneliness because they aren’t able to participate (financial) anymore.

Possible solutions: clear communication about prices and financial businesses in general (e.g. bank, hospital, groceries, energy-suppliers…), support of administrative businesses and teaching certain skills (e.g. computer classes), making administration easier, making the homes for the elderly cheaper… (Vlaams Centrum Schuldenlast, 2011)

Families with an average or high income
Over-indebtedness is not just a problem from people with a lower income. A lot of people with unexpected adversities, but still with an average or high income, can have debts (e.g. divorce, illness, unemployment).

So over-indebtedness can happen to everyone and people need to pay attention to this!

Prevention is very important! The only solution is information (Vlaams Centrum Schuldenlast, 2011).

Young adults
This category includes the young people who are officially an adult and have a certain amount of freedom, rights and duties which also have financial implications. (e.g. dorms, own transactions with creditcards, living with a certain budget, subscriptions…)

Young adults are easy to influence for advertisers.

From the age of 18 they need to make their own financial choices while they often don’t have a diploma, don’t have a job, don’t have a certain income…

The group of young adults is a various group, some of them still depend on their parents and some participate already on the labor market.

Young adults need to make important live choices. It’s a transition from dependency to independency.

Problems:

-         Don’t pay subscriptions and their personal loan

-         High expectations of live; they like to party and may act impulsive

-         They want to ‘fit in’; following the trends and easy to seduce to spend money.

-         No fix income

-         No money left at the end of the month

Solution:

-         good information, support, better control

-         Learning how to save money for later

In reality: There is a lot of unemployment in this category. This can be a consequence of leaving school at an early age. This gives them a weak position on the labor market which translates to a financial weak position. So it’s a mission for the ones who help them to give them a perspective for the future, so that they don’t see themselves as a failure.

But what about the university students?

In October 2014 there was a raise of the tuition fee, which is now 890 euros. So we asked a worker from the OCMW if this had an impact on students who need help with their debts. She answered:

Tuition fees is usually not a big factor in the debt. We always ask, before starting the procedure, what the biggest reasons are for the debt, and payment of tuition fees is not one of them. Usually the biggest reason are the medical bills and mismanagement of the budget. But what is mismanagement? Those with an income supplement usually do not have extras to save or to make a big spending. Is it bad management when you cannot pay for your primary needs? But you also have those that cannot manage. But most of the debts is because of unpaid hospital bills, maybe we should work together with hospitals, a small folder when someone is admitted. Then we could tackle the problem at its source. (Vlaams Centrum Schuldenlast, 2011)

But what we do have in Belgium, are the scholarships. But when can you get one?

First of all, you need to have the Belgian nationality, but under certain circumstances people which don’t have the Belgian nationality can get a scholarship.

Secondly, you follow an recognized education which is payable at a recognized institution. You also need to have enough credits. (studiepunten)

Last, it depends on the income and composition of your family.

(Het Vlaams Ministerie van Onderwijs en Vorming, 2016)

Children and the youth
They are a very important target audience for prevention. Money already has a large influence at a very young age. Problems can already occur there: you have spoiled children who don’t know how to handle money and children who are happy with few. Each parent has his/her own way of teaching the financial theme.

It’s very important to focus on questions like: How can we teach children and youth to handle money, whatever the environment is?

To find an answer to that question, we need to make 2 groups: children on the one hand, and youth on the other hand.

Children (0-12 years)
 When the subject is about businesses which include money, children are often left out. There are no individual incomes and expenses at that age. But children come into contact with money at a very young age. They see how their parents handle money (e.g. paying at a supermarket, to withdraw money, discussions and conversations about money…).

On the other hand, in a lot of games there is fake money involved  (e.g. children play someone who works at a grocery or a client, monopoly…).

It is very important that children can experience money as a positive or a negative thing. For example when there are financial problems it’s very important that a child can see money as a negative thing. This could have an influence on how they will handle money at a later age.

Children grow up in a family that is part of our society. Our society and their situation at home have a big influence on those kids. For example. In our society 1 at 2 children gets an allowance of average 21 euros. This amount increases when you get older.

But there are different influences:

o Poor environment vs rich environment

o Parents with debts

o Financial frustrations in a family (e.g. discussions/fights about money between parents)

o Giving an allowance? Or not?

o The norms and values in a family (what is money? What is the value/role of it?)

o Communication of parents about money to their children

Conclusion: Children are influences at a very young age by our society. (You want to fit in and have the newest cloths for example).

Possible solutions: learning children where money comes from (‘economy’), teaching children skills to handle money, learning about the different financial situations (‘What if you were poor?’), giving tips to parents about the communication about money to children…) (Vlaams Centrum Schuldenlast, 2011).

Youth (12-17)
When you get more in contact with money and get more responsibility (e.g. to go shopping). This gives them a certain insight in financial businesses (e.g. when there is money left from shopping, you might keep it or you need to pay it with your allowance, so you cannot buy everything you want.

Starting at the age of 15, the youth wants more money and starts working for this. More than ½ of the 16- and 17-years old are student employees. But what happens with that money?

The majority goes to the bank and puts it on their bank account, so they can save some for later. (e.g. a trip)

Although most of them don’t have any financial problems, some of them have a negative financial experience. Addictions for example, are here one of the causes.

Research shows us that when you come from a family with a low income, you will be influenced more by for example gambling.

When children get older, their parents change their ‘education’. In 2010 almost 7/10 between 10 and 17 years old get an average of 39 euros a month. Those amounts raise till 21 euros at an age of 10 years till 107 euro at the age of 18 years.

Here are also the causes mentioned at the age from 0-12 but we add a few:

o Meaning of studying (finishing secondary, university…)

o Position of parents against money of their children

o Attention of financial education in a family

Next to a family, school is also a very important influence.

Solutions: financial education at school, learning about debts, training and support for teachers, internet/social media/games as preventive action, collaboration between families/schools/scouts or chiro etc../sport club… (Vlaams Centrum Schuldenlast, 2011)

People who already have made debts and were in a previous path in debt counseling.
Some clients have already been on a path in debt counseling and ask not much later again for help. There are no numbers about how many persons are asking again for help. But we now that it occurs more than once.

But we see a certain evolution, clients come much earlier asking for help than in the past.

Reasons:

-         Few knowledge and skills about earlier experiences.

-         Chronical short of money which cause returning problems.

-         The motivation of a client is very important. When there is no interest, a fallback may occur. Or you may want to keep the ‘comfort’ of budgeting by OCMW or CAW.

-         The process of learning and helping is too complex.

(Vlaams Centrum Schuldenlast, 2011)

PEOPLE IN GENERAL POVERTY
Under this group we see people with a structural shortage of income. This is the consequence of poverty which allows families to buy the necessary necessaries. Those situations occur after receiving often from 3 till 5 years of aid. They depend on a social payment. But when they have a financial misfortune they often don’t have any money left.

We already talked about live getting more expensive, while payments don’t increase (enough). Next to this problem, it is very difficult to make a distinction between basic goods and luxury goods. For example: can a teenager evolve without the internet in our society? Can you work without any transport? Can you find a job without a cellphone?

The biggest cause here is the low income of families. Other causes are for example:

-         No savings when a financial misfortune occurs

-         Extremely low income

-         Generation poverty (an unequal start in live)

-         Waiting for money (e.g. when you are pregnant, when you are sick…)

-         Advertisement

-         Financial change (e.g. children are living home after being gone for a while)

-         Not understanding or wrong interpretation of information

-         A divorce

-         Wanting to fit in

-         Addiction

Possible solutions: you need to look at each profile individual so that you can offer specific help. One general solution may be to make the administration easier, which makes the learning process of the client less complicated. (Vlaams Centrum Schuldenlast, 2011)

People with a mental limitation
They are able to buy their stuff independently and can take on a loan but their limitation can cause some problems (e.g. administration, assessing a financial situation…) and they are very easy to seduce. This group is about people who need accompaniment!

So it’s very important to inform this person’s environment about healthy budgeting.

Who are people with a mental limitation? People who need guidance in their living situation, work situation and family situation.

Problem: They lack the critical point of view at our society. They are easily to influence.

Solution: budget counseling and education for mentors to prevent debts (Vlaams Centrum Schuldenlast, 2011).

Mental health problems
Sometimes the problems are only temporary or in a light form but there are also bigger financial problems. The social network of the client has an important role here. It is very important that the environment can intervene when necessary and seek help. Institutions aren’t always a solution.

Some clients aren’t able to work and need to live from an unemployment payment.

But sometimes the psychological problem isn’t the cause, but the consequence! For example a depressions.

Possible solutions: learning processes, education for mentors, certain instances…

So what is the difference between both of them: in the first category we see people with a handicap. Who can’t live alone and need a lot of help. With mental health problems we mean for example a depression or a problem which hasn’t been there all your life (Vlaams Centrum Schuldenlast, 2011).