Factors

Households
In general, raising debts have different causes. One of those causes is that our daily life is becoming more expensive. This make it for some parts of society impossible to live without debts. Belgium is seen as one of the most expensive countries of Europe for electricity-, cell phone- and internet provision. Here we can make a link with the policy of our country which has to guarantee an affordability of basic needs for everyone.

Another cause is the credit card. People with this card may underestimate their expenses. When we pay cash, the money is tangible which causes a feeling of loss when you give it away. Credit cards are seen as a psychological way to reduce ‘the pain of spending money’.

Our society expects a lot from its people. They assume that every citizen has the needed skills to consume. But this is unrealistic, some people don’t have the needed administrative skills and the necessary assertiveness to coop with the advertisement and sell-techniques.

Possible solutions: making people aware of the financial risks, to ask for help in time, of the influence of their environment.

One of the most important parts in helping households with an over-indebtedness is finding out which factors lead to their financial problems. This however is problematic, as households often find themselves in many diverse situations that are complex, which makes them hard to compare. Also, most people who struggle with over-indebtedness are not capable of pointing out the factors that leads to their problems.

Mostly it is a combination of individual factors such as health problems, divorce or loss of job and structural factors such as an unfavorable economic climate that lead to over-indebtedness. In a research of the Flemish centrum of debt settlement, 6 important triggers were found. These triggers were identified by debt counselors as most likely to be the cause of over-indebtedness. These 6 triggers are:

1.       An income that is structurally too low to cover basic needs

2.       Problems with budget control

3.       A lifestyle that is inconsistent with the income

4.       A member of the household that loses his/her job

5.       Unexpected illness of a member of the household

6.       A divorce or separation

The debt counselors were also asked to rank these triggers in order of frequency. At the top we find the most common cause of over-indebtedness.

The first factor is a structurally low income. This lower income correlates with other significant socio-economic variables, such as a low education level, which makes it obvious that these people will have a harder time making ends meet.

Secondly we see the two factors: ‘problems in budget control’ and ‘lifestyle that doesn’t agree with the income’. These two factors depend on poorly made financial choices. These poorly made financial choices mainly cause a risk when they are made repeatedly, cause a long-term commitment for the household or are made in a household that is already in financial problems. Recent studies have also showed that people with a lower education level are more likely to have problems in budget control.

Thirdly, a loss of job of one or more people in a household inevitably causes a decline in income. The risk of unemployment can also be linked to level of education.

Another trigger is unexpected illness by a household member. Especially chronical diseases involve most of the time high health costs. Some households can overcome these high costs thanks to a relatively high income, savings or precautions such as additional health insurance but for many families this is a huge burden on their financial situation.

A last trigger that was mentioned by the debt counselors was divorce or separation.

Because of the complexity and the combination of factors that cause over-indebtedness, little is to derived from the breakdown into regions. But it is noticeable that a structural low income is in contrast to Flanders and Wallonia the number one factor in Brussels which corresponds with the statistics that show that the average income of Brussels lays significantly lower than those in the other parts of Belgium.