Causes of Consumer Debt

The above fishbone diagram illustrates cause and effect relationship. The logical categorization of the various reasons why consumers are drowning into huge debt.

Causes of Consumer debt and their categories:

1. Economic and Investment Climate

a. Uncertainty in financial market causes interest rates hike and in effect affects interest on personal loans and various lines of credit.
b. Overconfidence in the economy encouraging people to borrow more.
c. False hope from the economic growth and forecast
d. Supply of finance where banks are more willing to lend people with bad credit histories.
e. Lower interest rates induce people to borrow more.

2. Income

a. Same level of income over the years while loans keep on going up
b. Limited opportunity to increase personal income
c. People are surviving on disposable income making them vulnerable to interest rates fluctuations
d. Reduced income specially when a person becomes less marketable in a competitive labor market
e. Saving too little or none at all


3. Culture and Lifestyle

a. No money communication skills. Spouses have differences in the way they spend their money. Most of the time spouses are hiding from each other their expenditures.
b. Addicted to entertainment including but not limited to watching movies, playing games, video-karaoke, and other form of entertainment.
c. Divorce and marital break-ups
d. Financial Illiteracy

4. Cost of Living

a. Hand phones, which in fact are becoming more fads and crazes instead of necessity.
b. Rising cost of healthcare as reflected in medical expenses.
c. Rising cost of education.
d. Hike in transport fare
e. GST hike
f. Rising cost of housing
g. Needs for broadband connection to gain access to the World Wide Web.


5. Employment

a. Automation displaces human labor.
b. Company mergers and acquisition causing lay offs on redundant workforce.
c. Underemployment
d. Downsizing of companies
e. Managerial jobs are taken over by intelligent systems.
f. Job losses
g. Retrenchment

6. Behavior (Psychological)

a. Financial phobia where people keep on denying their indebtedness.
b. Banking on windfall.Compulsive shopping.

Annotation:

There is still a need to gather anecdotal evidences through real life stories from the middle class who have personally experience those problems. Then create statistical pattern that points to the very root of the problem.

This evidences can only come out if people are willing to talk about it. They dont have to say who they are. They just need to zenduse their stories and compound it.

Another way of doing it is through focus group brainstorming activity. This will require more time and effort and the results will definitely be more productive and a great learning experience.