Is this why we are in so much debt?

THEY might not all have the talent, but they’ve certainly got the car, the house, the clothes.

And whether it’s whipping the paparazzi into a frenzy at glittering premieres or just popping into Prada for the latest catwalk creation, every move and purchase made by a celebrity is well documented.

But while the stars may have money to burn, their shopping sprees are impacting on us

all, creating a must-have society determined to emulate the celebrities - and damn the consequences.

We may not have the cash, but why should we care when we can just put it on our credit cards and worry about paying it off another day?

It’s not just over-spending on clothes and other consumer items. When it comes to mortgages, we are stretching ourselves to buy bigger homes in better locations, all kitted out in the right style. Cars too have to fit the bill.

The statistics are quite shocking. Excluding mortgages and other loans secured against property, consumers are in debt to the tune of 136 billion - equivalent to more than 3700 for every adult.

And while heavy debt used to be regarded as the problem of the low-skilled, poorly educated and elderly, in fact it is young people, most of them university-educated, who are most at risk by rushing to buy the trappings of success. Many high-earners are over-optimistic about their prospects and are piling thousands of pounds on to credit cards and taking out personal loans for cars and holidays.

They are ignoring the threat of a recession, unemployment and other potential shocks to their finances.

Annette Lamb, personal shopper at Jenners, has seen the buy-now, pay-later mentality in action.

"I know a few people who say their lives aren’t worth living if they can’t shop all the time. People get a buzz of excitement when they buy new clothes and accessories," she says.

"They don’t shop because they need new things. It’s just because they want them. They could spend a fortune buying a new wardrobe every season.

"Nowadays we’re very label-conscious. We associate certain labels with certain celeb-rities - be it Kylie, the Sex And The City girls or Posh Spice."

Account director Angela is one such person. The 29-year-old, who earns 24,000 a year, or 1450 a month after tax, drives a Mazda MX5 and owns a one-bedroom flat worth 68,000 in Stockbridge (for which she has a 100 per cent mortgage).

Her monthly outgoings include her mortgage of 550, car payments and insurance of 320, 240 on her two credit cards, 250 on food and household bills, a further 250 on going out and the same again on shopping for clothes - a total of 1860. And she has an overdraft of 1900, of which she has paid nothing for three months.

"I work in public relations and my image is very important. I can’t imagine meeting clients in a cheap suit and arriving in an old banger," she says.

"Over Christmas I spent 1500 on presents and my mortgage payment didn’t go through. My bank is fining me nearly 30 because of it and, of course, is looking for the payment straight away, which I don’t have.

"All the bills are arriving now. I dread the post coming in the morning.

"It’s so tempting to just borrow more money. I am getting two types of post at the moment. One is bills and stroppy letters. I haven’t paid my phone bill for three months now and they’re threatening to refer me to a blacklist. I know that would have huge impli-cations in the future.

"Yet, on the other hand, I am getting letters offering me more credit cards and loans."

She adds: "A couple of years ago I did promise myself that I would stick to one credit card, which had a 1500 limit.

"But then a work colleague suggested I took out a different card which was offering zero per cent interest for six months. I fell into the classic trap of not getting rid of the first one. And then the limit on the first card was increased to 3000. They’re now both up to the limit.

"I know I should be sitting down and doing a budget and trying to pay off my debts. But it’s such a depressing thought. I’m too scared.

"I borrowed some money from my dad recently and I made him all sorts of promises about paying him off within a couple of weeks. Needless to say, that hasn’t happened."

Advertising executive Iain is in the same boat. The 30-year-old earns 30,000 a year, or 1800 a month after tax. He owns an 110,000 flat at The Shore in Leith, for which he pays 650 a month.

His car and insurance comes to 280, he pays 150 on each of his two credit cards - both up to their limits of 2000 and 3000 - and he has an overdraft of 2000.

His food and household bills are 400 a month, he spends 300 socialising, 200 on clothes, 60 for his gym membership and 100 for his hi-fi hire purchase repayments.

"I’m the worst in the world," he admits. "I took out the overdraft to pay for a holiday last year and I haven’t even paid it off yet. And I know the interest on my credit cards is ridiculous.

"I’m getting married in June and my fiancee still hasn’t a clue how much my outgoings are. I’m really worried about the cost of the wedding now.

"Although we live together now, the flat used to be mine, so she doesn’t really know much about my finances. She’s quite conservative and organised about money, so I’m dreading telling her.

"But, at the same time, she and I always have a good time and blow a fortune and I’d just hate to start watching the pennies. Life’s too short. I have promised myself that I won’t borrow any more or take out any more credit cards. But I’ve told myself that before."

Spenders such as Angela and Iain are easy prey for the companies who are throwing money at them with aggressive advertising campaigns. Some people are even taking on mortgages which may be as much as four times their salary or even 120 per cent of the value of the house, leaving a huge amount of negative equity.

But they are banking on both their earnings and the value of their homes continuing to rise.

Charlie Kinnear, of Debt Counselling Services, explains: "Many of our clients are seriously in debt, mainly due to either a change in circumstances, numerous consolidation loans and credit cards or injudicious - and in some cases reckless - lending.

"Many lenders view professional applicants as better able to handle their finances, yet we have experience of clients who successfully manage multi-million pound budgets and at the same time are hopelessly over-committed with personal debt.

"The need to be perceived as successful is sometimes reflected in the seriously expensive car that is only used to go shopping. Satisfying peer-pressure demand to live in the

right area, dress in designer labels, pay for further education and expensive children’s hobbies can drain the most carefully managed budget."

He adds: "The average debt level of our clients is 35,000. In many cases the client had been advised to declare themselves bankrupt, inevitably by someone with no knowledge of the implications of doing so.

"We are regularly contacted by clients with unsecured personal debts in excess of 80,000. Many of the loans were taken out when the loan company phoned them at home and offered to consolidate existing agreements and give them some spare cash on top as they were good customers.

"Experience shows that many consolidation loans do not work. You cannot borrow your way out of debt."

Citizens Advice Scotland is calling for controls on aggressive marketing techniques, an obligation on creditors to provide best advice when selling a loan and financial penalties for creditors who breach legislation.

Consumer debt is now the single biggest issue that Scots bring to their frontline local CAB office.

And this is CAB’s busiest time, when the first credit card bills arrive after Christmas.

Almost a fifth of all household spending takes place in December - and it’s all on credit. In 2000, the total value of credit card spending in the UK was approximately 81bn. In 1993, it was just 2bn.

The number of credit cards in issue has also shot up from 28 million in 1989 to 47.8 million in 2000.

And consumer credit is growing at 14 per cent - far higher than incomes. Overall borrowing by UK consumers has now totalled more than 700bn.

Meanwhile, the proportion of post-tax income held as savings is now just over two per cent, the lowest in the past 30 years.

Kaliani Lyle, chief executive of Citizens Advice Scotland, explains: "The first credit card bills after Christmas are hitting the mat in households across Scotland.

"Many people will have over-stretched themselves financ-ially. If you do think you have got in over your head, the important thing is not to try and ignore it and hope it will go away. It won’t."

Names of debtors have been changed to protect identities

How to get out of debt

Make a list of all the people you owe money to.

Look at how you spend your money and prepare an accurate and realistic budget.

You still need to live, so prioritise your debts - the most important being rent/mortgage, heating and water.

Explore ways of maximising your income, such as overtime or a second job.

Stop using credit cards.

Always make some sort of payment, however small. This signifies a willingness to pay.

Avoid overdrafts and bank charges. If you think there will be insufficient funds to meet direct debits, cancel them and pay by giro or a pay-in book.

Do not allow yourself to be talked into another loan without taking time to think things over.

Never miss mortgage, rent or HP payments in order to pay secondary debts.

Do not make promises under duress or in haste.

Do not sign any form of security or guarantee without taking advice first.

Do not secure consolidation loans on your home.

Do not issue post-dated cheques to any creditor.