The relationship of materialism to debt and financial well-being: the case of Iceland’s perceived prosperity

In Iceland, levels of debt had risen to an unprecedented extreme in the years prior to the country’s economic collapse in October 2008. This rise occurred in the context of a consumer culture highlighting supposed psychological benefits of consumer goods. This paper reports findings from two studies, conducted during an economic boom in Iceland, examining the association of materialism and indicators of financial well-being: amount of debt, financial worries, spending tendency, money-management skills and compulsive buying. Study 11 (N = 271) showed that people who endorse materialistic values have more financial worries, worse money-management skills and greater tendency towards compulsive buying and spending. Study 2 (N = 191) replicates the findings of Study 1 and further shows that amount of debt, including mortgage, can be directly linked to materialism, controlling for income and money-management skills. The research contributes to the psychology of materialism and overspending and provides an evidence-based foundation for designing interventions encouraging individuals to improve their financial well-being.