Attitudes and Brain Chemistry

When it comes to consumer spending, attitudes and brain chemistry seem to matter a lot.

While people might need to buy a certain amount of groceries to survive or a train ticket so they can get to work, if they don't feel like shelling out for something that is less than essential, they can simply choose to keep their wallets shut. Or, they can add surplus funds to savings accounts or use the money to pay down existing obligations.

If enough people make those kinds of choices, then it naturally leads to an overall softening of demand -- and, often, a broad-based economic downturn.

Sometimes, of course, people have a hard time saying "no," because spending money triggers a pleasurable response in certain parts of the brain that can trigger addictive behavior. However, once heavy spenders -- like heroin addicts -- accept that they have a problem, bad habits -- and spendthrift attitudes -- can change.

If enough of them do, as the following report, "Hi, My Name Is Fred, And I'm Addicted to Credit Cards," from the Wall Street Journal's Jennifer Levitz, seems to suggest is now the case, it can only add to the downward economic momentum.

In the Debt-Soaked Economic Slump, Americans Find Solace in Support Groups

After years of free spending -- $200 jeans, a silver BMW and other grown-up toys -- Michael Wagner had racked up $25,000 in credit-card debt and was behind on his mortgage and car payments. Creditors called night and day. It was a "hopeless downward spiral," he says.

Then, last November, the 34-year-old sales manager for the St. Louis Post-Dispatch joined the "Sunday morning breakfast club," a group of debtors who meet weekly over coffee and eggs to share money woes. Mr. Wagner says he is now on the road to financial recovery, helped by his discovery that "I wasn't alone."

Far from it. In the debt-soaked economic slump of 2008, growing numbers of in-hock Americans are finding solace, and sometimes solutions, in support groups for the overextended. Gatherings like Mr. Wagner's are springing up at churches, colleges and coffee shops.

Meetup.com, a Web site that organizes physical and virtual meetings, says it now serves 138 groups who gather in person to talk about debt management, up from 24 a year ago. Debtors Anonymous -- a cousin of Alcoholics Anonymous -- reports greater demand particularly in Southern California and Arizona, areas hit hard by the downturn. Activity is rising online: Postings are up 81% this year on the debt-related message boards of iVillage, a women-oriented site owned by General Electric Co.'s NBC Universal.

And since the beginning of this year, the Southern Baptist Convention has been sending representatives around the country who are urging churches to start debtor-support groups.

Group therapy for folks who owe a lot isn't a new idea. Debtors Anonymous has been bringing borrowers together to battle what it calls "compulsive debting" for decades. But for years, the group's growth was hampered by the social stigma surrounding money problems, says a spokesman. "It used to be that you had to live in shame about debt," says Ashley Clayton, who helps organize the Southern Baptist campaign. "Now, there's been an awakening."

Growing pressure -- 11.8 million bank credit-card accounts are delinquent, and foreclosure filings topped two million last year -- is making more people ready to share sensitive debt problems with strangers. And observers add that many of the more outspoken debtors hail from a younger generation, those who grew up with MasterCards and without Depression-era memories.

The Hungry Boyfriend

Last month, 26-year-old accountant Shawanda Greene says she joined "Girls Just Wanna Have Funds," a recently created Washington, D.C., support group of mostly younger women. Ms. Greene's goal: to figure out why, despite an annual salary of $82,000, she had only $54 in her savings account.

The Girls kicked into action, encouraging Ms. Greene to track her spending. While some of her income was going to pay down debt, including $14,500 in student loans, Ms. Greene realized she was also spending too much on extras, like her $400 Cole Haan boots and her hungry boyfriend, who she says would consume much of her food when he came over. "Things were particularly bad when it came to produce," she says. "He'd eat like four tangerines at once....Sometimes I'd cut up some watermelon, pineapple and strawberries. He'd eat a good 75% of that."

So, Ms. Greene says she dumped him, after frequent arguments about grocery bills and other money matters. The former boyfriend, a 36-year-old engineer named Lindon Fairweather, says he shared grocery costs but acknowledges he did munch a lot of fruit at Ms. Greene's. "I'll eat more than four tangerines, absolutely....I can eat 18 mangoes in two days," he says. "That's just me."

In addition to tips on budgeting and penny pinching, debtor circles also offer a sympathetic audience for confession. The "NYC Smart Cookies Money Club," a Manhattan debt-management group for women ages 20 to 45, has scheduled an upcoming meeting with an agenda that includes disclosing "your rock-bottom financial moment."

On a recent Tuesday evening in Granger, Ind., the nondenominational Granger Community Church drew 375 people for "Financial Peace University." In its second year at Granger, Financial Peace is a sort of weekly group confessional for debtors who follow the live-within-your-means teachings of Dave Ramsey, a nationally syndicated radio host.

Fishbowls and Scissors

The church keeps fishbowls and scissors up near the stage for anyone inspired to cut up the credit cards on the spot. One who took advantage was Paula Frederick, a cheerful 42-year-old order manager at a phone company, who says her husband ran up to try to stop her from chopping up her Best Buy card. "I about took his finger off," she says, adding that she eventually succeeded in cutting up the card into pieces.

With church volunteers passing the microphones, Richard Rice, a burly, 37-year-old medical technician, rose to testify. Although he makes $70,000 a year, Mr. Rice said he had barely been able to save. Buffeted by a divorce last year that forced him to move and outfit a new house, he built up $20,000 in card balances.

"Back in January, one day, I had $30 to my name," he said. But now Mr. Rice said he has knocked $2,000 off his card debt and put aside $1,000 in an emergency fund. "I finally made a decision I wasn't going to live like this anymore," he proclaimed, drawing applause and a few raised fists from the crowd.

"I'm proud of you, dude," said Dave Dewey, a church volunteer who led the meeting. "A thousand may not be much, but it's $970 more than you had before."

In St. Louis, Mr. Wagner -- who at one point contemplated bankruptcy -- says the breakfast club taught him how to stick to a budget. It isn't always easy. Each Sunday Mr. Wagner and his compatriots aim to send a meal plan to Mike Pritt, a frugal technology consultant who serves as the club's unofficial adviser. The plans help members commit to eating most meals at home.

Having forsworn credit cards, each payday Mr. Wagner puts his cash for living expenses -- from gas to haircuts -- in envelopes. He says he started using the sales bonuses from his six-figure salary to pay credit-card debt and says he had knocked his balance down to $8,000.

A New Romance

Then, in early spring, Mr. Wagner started a new romance. The money designated for his credit-card bill began paying for dates instead. Three weeks ago, Mr. Wagner came clean to the breakfast club, confessing that the new relationship was killing his budget. Mr. Pritt suggested Mr. Wagner tell the girlfriend about his financial picture. Mr. Pritt also suggested the girlfriend, who enjoys shopping sprees, could have some spending problems of her own. "I said he should sit down and go over her budget," Mr. Pritt says. Mr. Wagner decided to talk to his new girlfriend after a St. Louis Cardinals game earlier this month.

She dumped him. She "didn't even want to hear about budgets or financial responsibility," Mr. Pritt says. Mr. Wagner says it's for the best. "She's too fun loving," he says, and "I'm too responsible."

Comments

[Martin]

Well, of course one could say that these people have ben very unwise in mismanaging their finances, but I think that it is laudable that they try to do something about it. I wish them success.

[dearieme]

I'm building up credit card debt for the first time in my life, because it's interest-free for 6 months. Lord knows why they made the offer, but I have graciously accepted it.

[Martin]

dearieme, that's quite OK in my view as long as you make sure to pay at the end of those six months. Just don't let that extra money seep into your spending habits...;)