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What is the most important thing to know about money?

By The Rev Ian Dewar, Lead Chaplain, UHMBT

Many moons ago, in a former life, I spent a couple of years working in the area of insolvency. It was the mid '80s when a credit boom was in full swing. Bank of England interest rates climbed to 12.75% and the highest mortgage rate was just under 17%. A little higher than today's unnerving predictions.

There is, however, one major difference between the 1980s and today. This major difference is also the clue to answering the question in the title, ‘What is the most important thing to know about money?’

What is the major difference?

It is not easy to get good data on this, but take a quick peek at the graph below and you geta good impression and the answer to the major difference. It is, of course, the level of debt.

As you can see from the graph, private debt in the UK has continued to increase phenomenally since 1980, despite the pain of the 1980s. Both business debt, corporate (in red) and household debt (in blue) have gone through the roof, it’s like a borrowing pandemic that has lasted over 40 years.

What is more worrying is the amount of that debt that is known as secured debt’ - very little is unsecured debt. If you are not sure of the difference, let me give you a quick example. Suppose that I lend you £1,000 and you don’t pay me back. I can chase you through the courts for the money but that can be very expensive. If you don’t pay me back, or haven’t got the money, I’ve lost all round. However, if we sign an agreement that says that the loan is secured against an asset - a house, a car, a family heirloom – if you do not pay me, I can force you to sell that asset so that I can recover my money. This is true even if the asset is worth more than the debt. You see the problem? If you borrow against a valuable asset, you risk losing that valuable asset.

A family heirloom might be painful, but losing your car could mean losing a job, losing your home could mean your children living in unsuitable accommodation.

Now, take another look at the blue line in the graph. If you thought that the 80s were bad for debt, take a look at 2015 to 2020. You get the picture?

You may say to me: "This is all very interesting, but what’s it got to do with a health festival?". Simple! High debt levels in an economic crisis can lead to high stress levels. Community health is linked to income because more income goes on paying debt as interest rates rise. Limited income, alongside rising food prices a) limits the amount people can buy; b) forces people to buy cheaper food - often unhealthier food.

Personal debt is a population health issue and is therefore a Bay Health Festivals issue.

So, what can we do? The answer lies in the headline question. What is the most important thing to know about money? Well, the great lesson that I learnt in my short stint in insolvency is this: the most important thing that you need to know about money is, what is your emotional relationship to it?

How you feel about money - what place it has in your life, what security or opportunities it gives you - are far more important to know than any rational, logical understanding of earnings and interest rates. I saw intelligent people in good jobs go bankrupt, because they had no control over their money. They were driven by impulse.

For population health this presents two problems:

  • An immediate crisis, cash is about to become in serious short supply.

  • How do we change our culture?

Look again at the blue line in the graph. In 1980 something changed. From 1980 onwards the blue line keeps on going – up! Something in our attitude to debt changed. It’s like an addiction and if we don’t break that addiction, like all addictions, it will break us. There will be a terrible price to pay – personally and/or in the lives of family, friends and communities. Debt is a Bay Health Festivals issue.

Oh, and by the way, this is non-political statement. All three major parties have had a hand in Government since 1980 – that's how deep the problem is!

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