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 non-representative 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.