Life-cycle and dispositional routes into problem debt

This paper presents analyses of the correlates of debt in a three-wave panel study of saving and other financial behaviour. The data used came from a representative sample of Dutch households. The results confirm the findings of previous studies on nonrepresentative samples and demonstrate that although economic variables alone predict debt quite well, psychological factors (especially present orientation, self-control and attitudes towards debt) improve our ability to predict indebtedness. The results also suggest that for most individuals being in debt is a short-term problem: chronic debtors are a small group and are distinguished by having more limited economic and social resources, being more present-oriented and finding it more difficult to control their expenditure than temporary debtors. Dynamic analyses suggest, however, that many of the differences in psychological variables between debtors and non-debtors may be a consequence of being in debt rather than a cause of it.