Increasing levels of both disposable income and convenient lines of credit have sent our country into a whirlwind of over-consumption and consumer gluttony. Sure, consumer spending may be good for most commercial sectors of the economy, but as the credit crisis now looms clearly before us it’s apparent that it’s quite bad for other sectors, namely housing and auto sales, which have both seen sharp declines in sales in the past couple years in particular. These major sectors often have trickle down effects on the entire community. If an auto plant lays off 300 workers, that entire community will feel the results. We are only now entering the stage in this game where these realities are going to come to light and we’re going to see just how big of a deal the credit issue is.
Recent statistics claim that personal savings rates have declines 10% in the past two decades despite median wealth than ever before, while debt-to-income ratios have nearly doubled. It has become such a widespread epidemic that people largely believe being in debt to be normal and not cause for concern. It most certainly is though, and can set you on a dangerous course for the rest of your life that you may never be able to steer clear of. Let’s look at some of the most common financial mistakes and how you can avoid them.
– Excessive spending
This is of course the prime reason people are in debt. The majority of U.S households are not living above their means through bills alone. It’s all the other little spending that pushes them over the top. From too much dining-out and morning coffees before work, to pay-per-view movies and the newest I-pod, all those little $10-$20 and up purchases add up drastically over the course of a year. No, you don’t need to live like a monk, simply live within your means. If you’re in debt or going to debt, what are you doing spending $50 taking your family to the movie theater when you could watch a movie at home and have all the popcorn and pop you want for under $10? Be smart.
– Payments, payments and more payments
We’re not talking about necessities like your hydro bill, but those other payments that all seem manageable, but pile up to hundreds of dollars a month. Be it satellite T.V, subscription radio, Xbox live service, cell phones, the list goes on. These things offer comfort and convenience, but are they really worth the monthly price tag? Task yourself with the challenge of getting rid of all of these services for a month and analyzing during that time just how vital they are to you, and whether they’re worth the cost and worth you potentially sliding into debt for. For that matter, add what the cost of the interest on your debt would be when added to these bills and analyze it that way. Cause that is in effect what you’ll be paying for each of these services if they push you over the breaking point.
– Credit cards
These are truly at the heart of much of what ails our collective credit woes. The convenience of applying for a card by email indeed allows us to have money sooner. But they also feed our willingness and ability to overspend as described in the first point. Credit cards are nothing but a double-whammy of financial horror. The credit card companies let you apply for credit cards by mail and have you believe that you can’t live without one. You CAN live without one. Face the reality that after using a credit card for as little as a couple years, you’re no longer even ‘ahead’ of the curve like you are when you first get that card, you’re now so far behind in fees that even what you’re borrowing by that point would already have been yours without the fees sucking away your money for the past years. Get rid of your credit cards as soon as you can and don’t look back. They are not a sign of privilege or class like they may once have been, they are nothing but instruments of financial destruction.
– Living beyond your means
Similar to the first and second points, but this one mainly applies to your housing and automotive choices. These are the two greatest symbols for you to display to the world, and therefore the two most likely to send someone overboard on. Crippling yourself financially just so you can have a slightly larger house or better car is just utter foolishness. You truly need to look in the mirror and examine what kind of a person you are if this is the case, and where you think this behaviour will lead you 5 or 10 years down the line. It won’t be in a bigger house or a better car, that’s for sure.
With savings rates in the U.S at levels not seen since the Great Depression, it truly will be interesting to see what becomes of this country and its economy. Our greed and short-sightedness have led us to the brink of ruin, which all of us will likely feel in the near future, regardless of our own financial sense. Still, you can only worry about what you yourself have control over. Keep your own finances in order and live within your means and that’s all you can do. If each one of us begins acting in a fiscally responsible manner, maybe one day there will be hope for this country yet.
Author: Landon McGeheeThis author has published 3 articles so far.