The Economy is Trashed|
One of the main reasons is America's addiction to debt. I posted this theory on Linkedin.com and got so many responses I could barely get through them. Truly, this is a subject on everyone's mind.
US consumer debt has reached staggering levels after more than doubling over the past 10 years. According to the most recent figures from the Federal Reserve Board, consumer debt hit $1.98 trillion in October 2003, up from $1.5 trillion three years ago. This figure, representing credit card and car loan debt, but excluding mortgages, translates into approximately $18,700 per US household. This is to be found at: http://www.wsws.org/articles/2004/jan2004/debt-j15.shtml
Comments from Linkedin.com users were a combination of useful and extreme. One user, from out of the country, thought we ought to penalize drivers if they drive over a certain number of miles and put a limit on the number of credit cards allowed an individual. Others included the suggestion that we change the usury laws so credit card companies can't charge over 12%. Another commented, that, "Americans were made addicted to credit".
This is one major mess. Big messes can't be swept up quickly.
An added factor is greed. Many lures of financing today offer the buyer a chance to wait several years before making payments. This gives buyers the feeling of getting something for nothing. They don't think about the giant payments and usury laws broken with the accumulated interest. All they think about is the furniture, i.e., that just got delivered and they didn't have to pay a thing to get it there.
What's worse is the automobile dealers are using the same incentives in order to get their buyers across their threshold and the cars off their lots' inventory.
Lest you think I am exaggerating. There is a prime time commercial for new televisions. It shows a couple having to deal with a tv that just bought the dust. Wife says, "Ok, go and buy one, but don't get carried away." The theme in the background is, "I want it all. I want it now." It's repeated more than once.
That is the theme for the majority of the buying consumers in the United States. No longer do people think about saving up for something. Why bother, flip out the credit card. I will worry about it later. It used to be that we hoped as years went by we would be earning more money. There were decades of cost-of-living raises. I sometimes think that the majority of the population makes decisions as if that trend was still in play. Of course, younger workers hope for promotions and an onward climb up the ladder. Times are such right now that anyone is just lucky to hold onto the job he/she has. Never mind dreaming that cash flow will increase.
We have to self-regulate ourselves back to sanity. We know that most likely interest on credit cards are going to stay high, despite the fact that most constitute usury. No law is going to come into effect mandating that a person can have only one or two credit cards.
The credit card companies are not going to voluntarily stop sending out cards to good customers, hoping someone will bite because they see a new one in the mail.
We all know that some consumers are struggling to keep the roof over their head and food on the table. In order to do that, they are making unwise use of credit. Helping them is a bigger picture.
Those who have a choice need to draw a line in the sand and make changes within their family and circle of acquaintances. Don't take on any new credit cards. Try to pay down the balances you have. When considering purchases of durable goods, they are going to last awhile and paying them will take years, what will you do if you lose your job after you take on this new debt.
Stop using credit cards for goods that will not be around when the bill comes. Stop fooling yourself into thinking it is a way to keep better records. Unless you pay off each balance monthly, money is going down the drain on interest.
Look for ways to eliminate interest payments in your life. Consolidate bills on one card if you will pay less, but look into the fine print before making a decision.
The next time you think about going out for dinner or to the movies, don't if you don't have the cash. Changing our purchasing habits can only happen one step at a time. You are going to have to replace this old habit with a new one.
Teach your children and talk to anyone around you willing to listen. The financial life you save will be your own.
The Bell Business Report
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