Don’t let the lottery push you into debt

Do you play the lottery? You’re probably already aware that your chances of winning a jackpot are extremely small, if not minuscule. But did you know that your chances of experiencing financial hardship if your neighbour wins the lottery are substantial?

To be more specific, for every $1,000 your close neighbour wins in the lottery, you are 2.4 per cent more likely to go bankrupt in the next two years. A recent survey from the Philadelphia Federal Reserve, which actually drew on Canadian data to back their findings, studied the interesting relationship between lottery winners and incidence of bankruptcies at surrounding homes (often in the same city block). While on first glance, one might think this result a little bizarre, but it actually makes sense.

The theory is that these people try to keep pace with their lottery-winning neighbours without the benefit of an extra cash windfall and eventually fall into bankruptcy. It’s all about “trying to keep up with the Joneses.”

“Simply, the most direct path to debt trouble, including bankruptcy, is spending beyond your means. And when this spending gets fueled by a sense of inadequacy because your friends and neighbours are able to afford more, the level of financial distress and debt disaster increases exponentially,” says Jeff Schwartz, executive director at the Consolidated Credit Counseling Services of Canada.

“Every household has different dynamics, including income, job stability and attitudes towards money management. Don’t get caught up in trying to keep up with the Joneses. Set your own individual goals and budget based on the needs and wants of your own household– not your friends, family or neighbours.”

Do you ever feel pressured to spend money that you don’t have, or should devote to other areas of your household budget? Here are some ideas to help stay on track.

It’s all about you

No one said sticking to a budget was easy. And to make it even more difficult: feeling pressure from your friends, neighbours or friends to spend when you know you shouldn’t.

That’s when you’ve got to focus on yourself. Your financial goals are about you. They will benefit you when you reach them.  On the flipside, when you find yourself in financial trouble because you’ve spent beyond your means, that’s on you also.

While your friends and family may be well-intentioned in trying to get you to spend or participate in expensive activity, you’re responsible for the consequences of your own money management- good or bad.

Communicate

Don’t just retreat from your family and friends if you are trying to stay on a budget. Communicate to them your goals, and some of the reasons behind your reluctance to spend.

You never know- you’ll likely uncover some additional emotional support when you share your struggles with those who care about you the most.

Keep a tight lid on needs and wants

In our highly consumer-based society, many people get a real rush when they make a purchase. Buying stuff can be fun- no question- but only if you can afford it. Drowning it debt, just for that purchase rush is decidedly un-fun.

Income inequality can make you feel like you are missing out, but spending within your means and sticking to needs and wants criteria is important.

It’s hard to stay on budget, especially if you feel like those around you are able to spend more than you can. If you’ve been spending beyond your means, there is no time like the present to change course. Call one of our trained credit counsellors or check out our free online debt analysis tool to get started.

Press Inquiries

Shivani Karwal
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pr@consolidatedcredit.ca
1-800-656-4120 x 1055