Who wants all the CREDIT?
The truth of the matter is……..Almost everyone.
Spending in America has spread like wildfire. The scary part about it is that so many families in our society are getting by on a monthly basis by the use of credit cards and personal loans. Although credit cards are a major factor in the escalating debt in our society, financing too many big ticket items are also a problem for people. Too many people are trying to “Keep up with the Jones’” by purchasing things that they really don’t need and consequently spending more than they earn.
“I’m going to win the lottery!”
Way too many people are waiting for that big windfall of money to pull them out of debt.
The fact of the matter is that if you can’t take control of your finances now, what makes you think you will be able to make a windfall of money last into retirement or provide any future generations of your family with any type of financial security.
The Payment Trap
It is all too easy to see that nice new flat screen television and think,”Wow! Just $24 a month…….Hey, I can afford that.” We often think of our purchases in the terms of the payment rather than price. People will do this multiple times with various consumer products and consequently end up drowning in minimum payments.
The average family is just one or two months away from going broke……….meaning that if they did not get paid for two months, they would be in a world of hurt. Most people don’t have much of a savings, are not worried about retirement, and have resigned themselves to the fact that they will be making payments on consumer debt for the rest of their lives.
The Cost of Paying Only The Minimum
The early financial pioneers of the 1950’s probably never would have imagined that twenty-five years after the advent of the credit card, that card holders would be paying for years on end. You see, almost all credit card companies structure your payments to allow you to only make the minimum payment amount of 2% of the debt balance. Repaying in this manner, it would take you over 50 years of $20 payments totaling six-hundred and one payments to payoff a $1000 charge. The total amount paid would be $1964. Nearly double the original amount charged.
Where are We Headed?
Our economy has been pushed along by consumer spending. The problem is that so much of the consumer spending has been accomplished through the creation of debt. It has been even worse over the last 5 years as people have been using their homes as ATM’s and spending every last penny of their refinance money.
Functioning in a society where cash is almost obsolete, has helped make things worse. Those who don’t know how to budget cannot actually feel or even see money leaving their hands and therefore aren’t given the perception of actually spending anything. It will become harder and harder to emphasize good spending habits to children because of these computerized transaction methods.
We are in a dire need to educate people on the perils of living strapped with consumer debt. Our children must be taught financial intelligence in the home and in the schools.
The increase in public debt has gone up drastically since 1950:
Year/Public Debt
- 1950/$257,357,352,351
- 2007/$4,889,977,193,543
- Source: Bureau of The Public Debt