Free-spending, debt-laden: Credit woes can have roots in emotional needs

DALLAS - Jacqui Payne wanted to be just like her friends, and credit cards were the means to get there.

"I had this impression that people who had credit cards were somebody, so I set out to have credit cards," she said. "I always felt that I wanted my friends to see me as an equal. They had credit cards; I should have credit cards."

There was one problem, Payne said: "They had the money to pay for them. I didn't."

Payne's mindset proved costly. The 65-year-old Arlington, Texas, resident ran up about $15,000 in debt among "13 or 14" credit cards before entering credit counseling.

Her debt problems are hardly unique.  To be sure, many consumers find themselves deep in debt through circumstances beyond their control. Many lose jobs and struggle to keep up with bills. For others, unexpected medical expenses overwhelm their budgets.

But personal finance experts estimate that at least 10 percent of debt woes are a direct result of overspending - pure lack of discipline.

For people like Payne, overspending and accumulating debt are manifestations of deep, unresolved emotional issues and unmet needs. Shopping becomes like a drug, just as work is for workaholics, and provides a temporary escape from worry and anxiety.

"It's an epidemic in our country," said Brad Klontz, a financial psychologist and co-author of "Mind Over Money." "I am finding that people with excessive debt associate money and material things with increased power, status and happiness, thus leading them to overspend."

Experts say several psychological motivators drive consumers' urge to splurge, including the desire to fit in with peers, the need to relieve stress or escape from problems, and the sense that their self-worth is derived from how much money they have to spend. Sometimes, consumers overspend just to change the way they feel.

Karen Kelley, a Dallas counselor and family therapist, recalls a client who was unemployed because of illness - yet continued to spend and build up debt.

"She'd come in looking like a million dollars," Kelley said. "She'd buy new clothes and jewelry, and I questioned her and she'd get mad at me.

"We finally figured out that she was lonely and she would go shopping; and, of course, the sales people were really friendly."

For Payne, getting credit cards "came down to the need to be like someone else. I wanted to have credit because everybody else had credit."

Payne grew up in Grand Prairie, Texas, the daughter of a stay-at-home mom and an aerospace design engineer.

"There was food on the table, clothes on our backs, but there was never any money for extras," she said.

Payne said her need to be like her friends started when she was about 14, when her father was laid off.

"That's when I really became aware of the fact that my clothes weren't as nice as some of the other girls' and I didn't have some of the other material privileges that they had, like new shoes for a special occasion," she said.

As she got older and acquired credit cards, Payne said, she tried to be disciplined. She and her former husband used to pay off their credit cards each month with his bonus, but then other needs took precedence.

"It became a bog of credit," she said.

When Payne divorced in 1981, "the only way I could have some of the nicer things in life was to use credit cards."

She tried to tell herself she could use them only for emergencies. "But then a pair of shoes became an emergency."

She eventually fell behind on her payments, and the seasonal nature of her job as a customer service representative for a national moving company made it difficult to catch up.

"If you spend each paycheck to the absolute max and you've gotten ahead of yourself with your debt, you can get yourself in trouble very quickly, and that's what happened to me," said Payne, who earns $32,000 a year.

"I was spending everything I got."

Did that make her feel better?

"For five or 10 minutes."

For many people, experts say, money - or the material possessions it can buy - plays a key role in determining their sense of self-worth.

"A lot of people spend a lot of money trying to impress other people," said Kelley, the Dallas therapist.

That was true for Sean and Cindy Lofgren when they racked up $20,000 in credit card debt between 1998 and 2001 trying to keep up with the Joneses.

"We were living this dual-income, no-kids lifestyle," said Sean Lofgren, 39, a business development manager for a Dallas packaging company. "We thought we owned the world."

Back then, he was a business planner for a global communications company, and Cindy was a marketing manager for several firms. They lived in a penthouse apartment in Chicago. They used credit cards to travel to Maine and California and to go on ski trips to Colorado.

"Life was good," Lofgren said.

Then he lost his job in 2001.

The couple moved back to Texas and joined St. Andrew United Methodist Church in Plano, where they made a "real commitment" to getting out of debt. The church is among many that offer finance counseling. By 2008, they had paid the debts off. Now they pay only in cash - even for vacations.

Another example of overindulging is Sam, who found that spending boosted his self-image. "I would go to a bar with friends and pull out the American Express card, and I felt it was a big deal," said the Dallas professional in his late 40s, who didn't want his last name published. "I felt I was successful."

He said spending also provided comfort when he was coming to terms with being gay.

"Back in the 1980s and '90s, I was completely in the closet," Sam said. "When you try to repress your real self, it finds a way to come out. With me, it was spending and using my credit card." Spending "made me feel good and was a distraction, something pleasurable I could do for myself."

Then it all came crashing down.

"In 2003, I had $50,000 in credit card debt," Sam said. "I had lost my job. I was doing temporary work and making about $35,000 a year, so I filed for bankruptcy.

"I suddenly had to learn how to live on what I actually was making. I had no idea how to do that."

His therapist recommended that he join Debtors Anonymous, a 12-step program for compulsive debtors patterned after Alcoholics Anonymous.

Today Sam is debt-free and has a sponsor to talk things over with whenever he's tempted to overspend again - as happened 5 { years ago when he was having a bad day at work, left for lunch and found himself in the Gap.

He called his sponsor and said, "I'm in the middle of the Gap surrounded by clothes, and I have no idea how I got here."

His sponsor told him what to do.

"I put everything back, and I didn't buy anything," Sam said.

For many people, a trip to the mall means a break - even if it's temporary - from emotional pain.

"Shopping relieves their stress," said Klontz, the financial psychologist. "However, like with new toys on Christmas morning, the feeling quickly fades and is replaced by more stress and guilt as they are left to deal with the consequences."

That was true for C.J., a Dallas entrepreneur and member of Debtors Anonymous who asked to be identified only by her initials.

C.J.'s troubles began after she was injured, became unable to work and was living on disability payments that amounted to about one-fifth of what her income had been. She turned to spending to alleviate her turmoil.

"It was a high akin to drinking," said C.J., who's single and in her 50s.

"When I would go into a store, everything was fresh and clean and organized, and it just felt better, especially in high-end stores."

Eventually, though, buyer's remorse set in. She didn't even use some of the clothes and other items she bought.

Her credit card debt peaked near $37,000 nearly 20 years ago. She joined Debtors Anonymous after realizing she couldn't pay her bills and yet couldn't make herself stop shopping.

She's been debt-free for four or five years now. "I don't owe any money except my mortgage," C.J. said.

While their stories may sound discouraging, those who spent out of emotional need say their situations weren't hopeless. And many have worked themselves out of mountains of debt.

It took Jacqui Payne five years to get her credit card debt under control.

"It was learning to budget," said Payne, who used a debt management plan established by the Consumer Credit Counseling Service of Greater Dallas. In such a plan, the debtor makes regular payments to the agency, and it disburses the money among creditors.

"I figured out that you had to suck it up and wait, accept the fact that you can't have everything the minute you want it," she said. "You have to work for it; you have to save for it."

Payne isn't debt-free yet, but she's gotten better at managing her debt.

She uses one credit card to buy gasoline and pays it off every month. Another card has about $4,000 on it, the result of traveling with Sweet Adelines International, the women's singing group. Payne said she will have that paid off at the end of the summer.

"Every spare penny is going on that card," she said.

Payne advises those who are in heavy debt and spending uncontrollably to look closely within themselves.

"It took me until I was almost 60 before I figured out that credit has its uses, but it can't be used as a crutch," she said. "If you have an emotional need to spend money, you need to figure out why and fix it."

HOW TO KNOW IF YOU'RE IN TROUBLE:

Credit experts say there are definite warning signs that your debt level is too high.

"If you're making minimum payments or you're having trouble making minimum payments," said Todd Mark, vice president of education at Consumer Credit Counseling Service of Greater Dallas. "If you're barely meeting your obligations, that's a telltale sign. If you're having to choose between debts, that's a sign you're truly in trouble."

Others:

-You don't know the total amount you owe.

-Your credit card balances increase each month.

-You're at or very near the limit on all your cards.

-You frequently charge items that you used to pay cash for, such as gasoline or groceries.

-You skip paying your bills some months, or you pay late.

-Next month's bills arrive before you've paid this month's.

-You're afraid to open bills. (Ignorance isn't bliss in this area.)

-You're using cash advances to pay your bills.

-You have frequent arguments at home about money.

-You're hiding purchases from your spouse.

-You're consumed with thoughts of your debt.

(By Pamela Yip)

HOW TO DIG OUT OF DEBT:

If you're buried in debt, experts advise, seek out your creditors right away and try to work out repayment plans.

"Be honest about your situation, the reason for your default (or) delinquency - a divorce, job loss," said Todd Mark, vice president of education at Consumer Credit Counseling Service of Greater Dallas.

"Know what you can do and what you can't do. If you have no money to make toward a payment, don't make that commitment."

Other tips for paying off debt:

- Prioritize your expenses. It's "always housing first, transportation second, utilities third, your food and your necessary medical expense and/or insurance," Mark said.

- Pay off the balance on the credit card with the highest interest rate first (unless the balance on any card exceeds 50 percent of your credit limit).

- If you can, pay more than the minimum monthly payment. If you can afford only the minimum, divide it in half and pay that amount every two weeks. These "micropayments" will reduce your balance and, hence, the interest you pay each month.

- Avoid borrowing money to get out of debt, especially consolidation loans. You could end up losing everything because you've tied it all up in one loan.

(By Pamela Yip)

(c) 2010, The Dallas Morning News.

Distributed by McClatchy-Tribune Information Services.