Generation Y would do well to avoid getting into debt as a way of life

Living in debt has arguably become a way of life for those who can be loosely classified as Generation Y — those born during the 1980s and early 1990s.

In recent years, low interest rates have deterred the public from saving, and with easy-credit promotions dangling carrots to spend today and pay tomorrow, they are spoilt for choice.

The temptation to splurge is therefore irresistible, in many cases ending up in an inability to pay the piper when due and being dunned consequently, with penalties, and in the worst-case scenario, bankruptcy.

In contrast, the older generation lived in fear of being in debt and having to “beg, borrow or steal” when in need of funds. The lender of last resort was, for some, a loan shark.

Spending within one’s means was therefore crucial. There is, however, no fear of ending up in a debtors’ prison today, as was the fate of Charles Dickens’ father almost two centuries ago.

Against this background, the focus of the article “The best ways to reduce the cost of borrowing” (Sept 25) is on reducing the effects of overspending, rather than on how to avoid it in the first place.

Dickens offered a simple formula from his experience, through one of his characters, Wilkins Micawber:

“Annual income twenty pounds, annual expenditure nineteen (pounds) nineteen (shillings) and six (pence), result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

“Annual” would, of course, be “monthly” in today’s context, and not a few are dependent on the arrival of their pay cheque to pay off the spending accumulated over the month.

This homily on frugality may be unacceptable to most people today, when economic growth appears to be based on borrowing rather than internal funds.

Scarcely a day passes, however, without an advertisement announcing an application for winding up or an individual who has defaulted.

Advice on how to stop one’s debts from spiralling may be useful, but one could mention how to avoid getting into debt.