Stop Borrowing Against The American Dream
I'm In Debt
- Posted:
10/23/2008
Most economists and financial experts will agree that the U.S economy will keep re-adjusting itself and eventually pull out of the latest slump we happen to be in. The U.S economy seems to bounce back whenever it does fall, but as consumers, it's time we stop falling for quick financial "fixes".
Taking out a college loan (or two, or three...) and a home mortgage is something most people do to help realize that "American Dream". Those debts can even be considered good debts. But is it really necessary to borrow against our future to buy that big screen, fully loaded, plasma tv with the swivel wall mounts? Or swipe our plastic as we speed our way through the drive thru for lunch on the run?
Is buying what we want, when we want it part of the American Dream? Maybe for the split second as we install the new TV and watch our favorite show; or the time it takes us to eat a cheeseburger and fries - but what about when the bills start rolling in? That's when we realize that our American Dream has turned into the American Nightmare.
Want a stable financial future? Then it's become necessary to save money. We can't continue tos pend money before we make it all the time. I'm guilty of this, too. I've got tens of thousands of dollars remaining on college loans, and I've been out of college for more than five years now. I've got some credit card debt again, after finally getting out from under credit card debt a few years ago, because I had some "must-have" items that I didn't have the cash upfront to get (refrigerator, washing machine, dishwasher.. yes, all at once.) But had I had substantial savings, I wouldn't have had to charge these items!
For the last half-century or more - there didn't seem to be a huge need to save money. We could refinance our homes to take that cruise we'd been wanting to take; get guaranteed school loans to send our kids off to college.
The rules have changed. According to Stephen J. Church, an investment consultant who studies consumer finance statistics, he's concluded that:
Before the 1990's: 80% of income was used for daily living expenses and the purchase of goods (like the tv); 10% of income was used to repay debts; 10% was used for saving and investing.
By 2006: 89% of income was used for daily living expenses and the purchase of goods; and 13% of income was used to repay debts.
The entire amount of income was being used, and none was being saved. To make it worse, families were borrowing even more just to get through the average year.Families with homes "rode it out" by taking money in the form of home equity loans. When home prices skyrocketed in the 1990's to 2000's; lower and middle class families borrowed aggressively and their savings reached NEGATIVE 10%.
There is only one real way to get out of this mess - and that is to save more, spend less. And stop borrowing against the American Dream.
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