The facts: The average American household has $9,300 of credit card debt. And the national savings rate is below zero. The bottom line, people are spending more than they earn. Irresponsibly.
Someone I work with just recently found out she’s pregnant. She’s 18. She is neither emotionally or financially ready, and she just bought a $27,000 car. Meanwhile she seems to barely pay her rent. Situations like this baffle me. Even more shocking is when she said she would try to get as many credit cards as she could to build credit. It doesn’t take a scholar or financial guru to realize she’s going to land herself in a deep hole. Sadly, too many people are like this.
American Public Media just released a special documentary bankruptcy called “Bankrupt: Maxed Out in America.” It looks at the growing numbers of people filing for bankruptcy, their stories, and whether this is a good option. The program interviewed John Ninfo II, a bankruptcy judge, who said so many people claim they had a catestrophic event but they don’t have a penny in savings. Why? Credit card debt. Personally, I don’t understand how people can rack up tens of thousands of dollars in charges, totalling more than their annual income! I think it’s the new marketing techniques of the late 20th, early 21st centuries. People have become selfish, want to buy more, and lenders do all they can to get you to spend more and go deeper into dibilitating debt.
Money magazine, in their May issue, had an article about how personal debt in the U.S. has reached an all-time high. The article features a Reverend Billy Talen who, like other religious figures, are promoting better living through less shopping. Researchers have found that between 2% and 8% of Americans “suffer from compulsive buying, a psychiatric disorder.” It continues to say that not only are people preoccupied with shopping and buying things, but their lives suffer because of it. And, solutions can be as simple as tracking your cash flow and the amount of time you shop.
I was watching a news report the other day on the high prices of gasoline and one man who was interviewed filling up at a gas station said, “How are we going to feed our families?!” And I thought to myself… You save? You curb other spending? You don’t buy a new flat screen? The average national gas price in the U.S. is $2.90/gal but the rest of the world pays around $5 to $6 per gallon. We pay some of the lowest prices in the world. If someone questions on how to feed their family because we’re paying $3 for gas, then they have serious financial problems. Our wages are higher than many countries where fuel is more costly, so why do so many seem to have trouble even paying for gas? Once again, frivilous and mostly needless spending on credit cards, enormous debt, lack of saving, and oodles of irresponsibility.
Saving is possibly the most important thing, creating a cushion for anything that may happen. Budgeting is also part of saving and I think few know how to properly manage their money. One thing I sadly chuckled at in the latest issue of Money: There’s a tease for a story that simply says “Oops. We forgot to save for college.” Wrap your surprise around that one.