We live in a culture of ‘buy now, pay later’, but this can sometimes lead to us taking on hidden debt. This is the type of debt that can build up quickly and put us in a sticky situation before we realise it.
Money management app, HyperJar, has launched a guide called ‘A Concise Dictionary of Debt’. This guide highlights all the jargon aimed at enticing us into taking on debt we wouldn’t necessarily sign up for.
What do we mean by ‘hidden’ debt?
When we talk about hidden debt, we aren’t talking about obvious things like a mortgage or a personal loan. With that type of debt, you go through a stringent and transparent application process, so you will know exactly what your monthly repayments are going to be and how long you will be making them for.
‘Hidden’ debt involves going into debt through overspending on items you may not necessarily need. Jargon such as ‘spread the cost of a big purchase’ or ’flexible payment options’ can make overspending seem natural. It can entice us into taking on debt that we think is manageable despite the fact that we cannot afford it.
How can you avoid ‘hidden’ debt?
If you like a treat now and then and just think: ‘well, I’ll pay that off later’, then you are feeding into this concept of hidden debt.
There is nothing wrong with online shopping and treating yourself. But being conscious of how you shop and manage your money is the best way to avoid taking on unnecessary debt.
HyperJar’s Chief Growth Officer, Natalie Malevsky, comments ‘let’s have a positive refresh of the way we think about spending our money, without the financial hangover of debt-for-shopping’.
Understanding the intent behind marketing jargon on a website or in an advert can be the difference between finding yourself in a financial hotspot and not.
For example, you may read the phrase ‘flexibility to purchase and pay over time’ and think: ‘great, I am in control of when I pay this off’. But in reality, you need to be thinking, ‘I will be taking on debt if I go down this route’.
Similarly, something as innocent as ‘change your living space to suit you better’ could lead to hidden debt. There may be absolutely nothing wrong with your living space. But that phase could entice you to make changes that you may not be able to afford.
Are there better ways to manage your money?
Money management can be the key difference between taking on hidden debt and having a healthy bank balance.
Monthly budgeting can really help you to understand what disposable income you have to hand. It can therefore show you how much you can afford to spend on treats and non-essential items.
It puts the emphasis back on what’s actually in your bank account and available to you, compared to the ‘debt-for-shopping’ mentality.
You can then choose to put these savings towards specific goals, or just have a savings pot that you can dip into if you feel like you want to ‘elevate your shopping game’ without taking on debt.
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