How being open about your debt problems can help you solve them

As Canadians continue to feel the financial pinch of inflation and a rising cost-of-living, recent studies say those who are more open and honest about their debt have an easier time getting out of it.

Though many suffered financial problems during the pandemic, Sandra Fry with the Credit Counseling Society said they were not as busy during that time as one might think. "A lot of the government programs helped people with low income, so they didn’t necessarily need our help," said Fry. "Usually it's a crisis that brings them to our door more than anything else."

Fry added that public health and travel restrictions meant people weren’t spending as much money recreationally, which also lessened the financial strain. 

However, now that the pandemic is ending, Fry says business is picking up. Inflation and rising food prices are the straws that broke the camel's back. "You add a couple of hundred dollars more for groceries, and you have rising costs on lines of credit and things like that, they're going to feel the pinch," she said.

Fry said though more people are experiencing debt problems, there is still very much a taboo out there with respect to talking about the money we owe. "There really is, especially with the older generations," she said. "Maybe some younger ones are starting to get a little more open about things."

Discussing debt has been the recent focus of study for Miranda Goode, associate professor of marketing at the University of Western Ontario's Ivey Business School. Goode is the co-author of "Helping Those That Hide: Anticipated Stigmatization Drives Concealment and a Destructive Cycle of Debt," a study published in the Journal of Marketing Research in December 2022.

"We really started to think about how there was more to debt than just the usual reasons why we think people end up in debt: impulsive purchases, lack of self control, bad decision making," said Goode. "That does all contribute to us ending up in debt, but it seemed like there was more to the story."

One of Goode's co-authors with extensive credit counseling experience began to notice a disturbing trend. "A number of her clients really worried about other people finding out about their debt," said Goode. "I thought that was fascinating, and it seemed more related to the fear of being stigmatized."

The research team ran a series of surveys, scenario-based studies, and experiments in order to validate their theory. Goode said they found most people were afraid of the stigmatization of debt. "They're worried that others will disapprove of them, they're worried that they will be treated differently in social interactions if people find out about their debt. So this stigmatization fear is legitimate,"

Participants in the study came from a wide range of ages, and identified as middle-income, middle-class Canadians. "Your average run of the mill teachers, lawyers, police officers, stay at home parents," said Goode.

The study showed that people in debt are more likely to hide it from others. "They actually engaged in hiding behaviour, and that might take the form of being more secretive and avoiding discussion or those situations where it could come up in conversation," Goode said.

She added people will sometimes even spend more money in order to hide their debt, pointing to the common situation of splitting a restaurant bill evenly, despite having ordered a cheaper meal.

"When you get into that situation and you have this fear in your mind, you end up doling out more to avoid having to mention 'hey, I'm trying to pay down my debt.' You'd rather just spend more to keep hiding it," she said.

Fry has seen similar behaviour in her clients. "Sometimes it's so overwhelming that they're almost paralyzed about what to do first," she said.

The Credit Counseling Society's 2023 Consumer Debt Report found that 82 per cent of Canadians say spending on essentials is the main cause of their worsening financial situation, and 33 per cent feel anxious about their current financial situation.

Goode said it hasn't been an easy field of study. "We're trying to study something that people hide, and so it's been incredibly tricky, but also really rewarding in terms of the findings and hopefully being able to provide people with help."

She said a key finding came from a five-month intervention study, in which participants discussed their debt in person, and actively worked towards paying it off. "Being in person, around other people where you felt like they were experiencing similar circumstances, you could open up in a safe environment about your experiences and your struggles," said Goode. "That connection that you build is what led to significant increases in well-being. We actually did see people repay debt more."

She said the fear of debt stigmatization is not legitimate. "We really need to open up the conversation around that, because there's positive benefits to being able to talk about it, being able to get help with it.

"Especially for people who have this fear of being stigmatized, getting help is the right thing."