Hello $wanigans! Welcome back to The Green Swan. As you know, I don’t post much about debt around here. I don’t have a compelling debt story where I climbed out from under an insurmountable credit card or student loan bills. But it isn’t hard to notice that it seems like debt is going up everywhere we look.
As a matter of fact, it is going up everywhere. Just take a look at the US Debt Clock! Really, look at it for a few minutes, you’ll learn something. What you’ll notice is that all the tickers are going up! US national debt, State debt, local debt, corporate debt, mortgage debt, student loan debt, credit card debt…it is all going up. And it can be a bit daunting if you look at it long enough.
So try not to…my recommendation is focus on what you can control, your debt. Has your debt gone up in the last year? Are you conscious of your debt situation? Understand all debt has risk associated with it. Debt used wisely can be great, like a mortgage loan, but debt can be dangerous too. Even mortgage debt can be dangerous. Many folks saw significant drops in home values in the 2008/2009 recession and were underwater with their mortgage (home was worth less than the debt). Like I said…all debt has risks.
All high interest rate debt, like credit cards, should be avoided like the plague (unless you have the cash ready to pay off the credit card debt when it comes due before any interest kicks in)!
No matter what, debt shouldn’t be taken lightly. We should think long and hard before entering into debt to make sure it is right for us. To talk more about debt, I invited Jacob from Power Over Life to share a few thoughts. In short, his view on debt…bold!
Your Debt: Idiotic and Inconceivably Stupid Decisions
Debt is ruining the world that we know and love. Here are four distressing statistics:
- In 2015 alone, the U.S. spent $223 billion of our tax dollars to pay the interest for the national debt. This total amassed to 6% of the federal budget (Fix the Debt.org)!
- The average U.S. household with credit card debt has balances totaling $16,061 (Nerd Wallet).
- In the 3rd quarter of 2016 there were 44.2 million people that had outstanding student loans that totaled nearly $1.3 trillion…and yes that is trillion with a ‘T’ (Student Loan Hero).
- For those who have auto loans, the average U.S. household has $28,535 of debt (Nerd Wallet).
And people say we don’t have a debt problem…that’s a bunch of hog-wash. Individual, business, and government debts are hitting astonishing levels.
Of course, there are great reasons to have debt. Rarely does an individual have enough money to pay cash for a home. In a lot of instances, it makes sense for businesses to incur debt so that they can use that debt to make income. That’s just called leveraging, and if used correctly, it can be extremely beneficial.
But the real problem is stemming from a society who has allowed themselves to have a lackadaisical attitude about money and debt. This has led to massive amounts of borrowing.
I understand the logic of taking out money to buy a house or go to college, please don’t misunderstand. But there is an ever increasingly higher percentage of our debt coming from, excuse me for being a bit too straight forward, idiotic and inconceivably stupid decisions.
Here are a few recent examples of people around me (and I’m sure you have these people around you too… maybe you are this person?) that are making idiotic and inconceivably stupid decisions.
- My wife’s friend and her husband are $40,000 in debt, yet they just went to Hawaii on a two-week vacation. And I know that they didn’t camp on the beach to cut costs.
- One of our neighbors has $50,000 of student loans (so far), yet they love to go out to eat and go to a movie (which aren’t cheap) every…single…weekend.
- A relative of mine just bought a brand new $60,000 BMW. I forgot to mention that he is only 24, with student loans and not a great job. “I just really wanted it” was what he told me.
Now, having said all of that… I have made some of the same idiotic and inconceivably stupid decisions myself, and I will tell you here and now that I paid dearly for making those mistakes. I know better now and I hope others can learn the same thing.
I can promise you this… the lackadaisical attitude that we, as a collective society, have towards our finances will have a much deeper impact on us in the future than we could ever have realize today.
If you are making idiotic and inconceivably stupid decisions, will you please (I beg you) reconsider? There is a different way of getting what you want, without potentially jeopardizing your future…it’s called saving for it (imagine that)!
Debt, if left unchecked, has a great chance of ruining your financial life. Debt has caused a lot of heartache, countess sleepless nights, and left marriages and families in shambles… and if you aren’t careful, you too might DEBT-ONATE!
Jacob Merkley is a full-time blogger who started in the accounting, financial, and retirement realms before switching to working online. Now he focuses on teaching others about Life Skills that put YOU in control, including the important principles of money management. He blogs over at PowerOverLife.
Thanks for sharing your bold view on debt, Jacob. Always good to get a wake-up call. It is never too late to take a fresh look at our debt situation and to take back control.