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Debt Myths

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The Psychology of Debt

Debt is a universal problem, with a doubt, but it seems to beleaguer some more than others. Psychologists have speculated for decades why this is, postulating that perhaps certain personality attributes either predispose or prevent one from falling deeply into indebtedness. Interestingly, the results of research on this topic have been unclear. Some psychologists have found slightly significant correlations between individual characteristics and debt-proneness, while others have found no connection at all. However, in performing this research, psychologists have inadvertently discovered stronger connections between attitudinal and demographic attributes and the proclivity toward debt. In this post, we’ll discuss one of the most prominent studies that examined this connection.

The Premise of the Study

A professor of psychology at Buffalo State University, Dr. Jill Norvilitis noticed that more and more of her undergraduate students were becoming shackled to credit card debt at such an early age. This realization formed the impetus for the ensuing study she conducted to examine the connection between personality variables and debt problems. Her research studied 227 Buffalo State undergraduates. None of the personality variables she investigated were significantly correlated to debt woes, but her research did unearth some other interesting connections, some of which are included below.

The Factors That Matter

Below is a brief synopsis of the factors that correlate with debt problems, according Dr. Norvilitis’ research and that of dozens of other psychologists:

• Demographic & economic factors. Not surprisingly, people of lower socioeconomic standing are more likely to be in debt because of lower incomes and higher expenses than other groups. Similarly, young people, who generally have little to no income, tend to have higher levels of debt than older people. With college students, men have higher levels of debt than women. Finally, knowing many others who are in debt also increases one’s risk for debt.
• Psychological factors. The ability of psychologists to predict credit card debt according to personality variables is tenuous at best. One frequently examined attribute is locus of control, or the extent to which a person believes he or she controls life situations, and its relationship to debt. The majority of psychologists have hypothesized that an external locus of control, or a tendency to attribute successes and failures to external events, would correlate with debt problems. While some researchers have found evidence to corroborate this theory, others have found no connection whatsoever. In addition, psychologists have also explored the relationship between self-efficacy, or one’s willingness to take action and persist in times of adversity, and credit card debt. A handful of researchers discovered unsuccessful credit users tend to have low self-efficacy, but this has yet to be authoritatively confirmed by other research.
• Attitudinal factors. Attitudes correlate much more powerfully with credit card debt than personality variables. Unremarkably, people who have more debt-tolerant attitudes are more likely to be in debt. This finding begs the question, however, of whether the debt-complacent attitudes are a symptom or a cause of debt.