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The burden of debt

 I don’t  think many  people set out to accumulate excessive debt.   Many accumulate debt because of circumstance, and yes there are those who end up deep in debt because of what we perceive as lack of control.  While we tend to disparage those with this apparent lack of control, we have all occasionally been in that position.  I know I have.

A significant number of American families are a major car repair or a loss of a months pay from becoming insolvent.  For the most part they do the best they can.  This past recession has put millions in a precarious situation.

Student loans, mortgages, car payments, child care costs, rising utilities, tuition costs; all stretch the family income.  Any type of emergency, either perceived or actual can trigger a series of credit card charges that unchecked can lead to disaster.

I have never personally been in insurmountable debt, but I have had significant balances on credit cards.  I have had adjustable rate mortgages that were at 11 ½% interest.  I have had multiple car payments.  I had to borrowed to pay for college for two kids.  I know how easy it is to get into debt, and how hard it is to get out.  It is hard to know from the outside who is squandering money way beyond their means, and who is just trying to keep afloat.  Excessive debt is not smart, but it sure is easy.

Now that I am out of debt, I often think how foolish people are that get so deep in debt;  but then I have to remember where I came from.  It has taken me 45 years to pay off my college loans, loans for my kids college, my house, to grow out of caring what kind of car I drive, or if my wardrobe is fancy enough and to actually accumulate some retirement funds.  I try not to judge others harshly (often unsuccessfully) for things I have done myself.   As long as debtors accept responsibility for their situation, and not try and blame credit card companies, or predatory lenders, or someone else for their actions; there is hope for them.  Once they start blaming someone else, there is little chance of ending the cycle of debt.

The formula for getting out of debt is simple; you need more money coming in than going out.  If you cannot increase the amount coming in, you have to reduce the amount going out.  If anyone needs any advice, there are numerous programs on radio that talk about how to pay off debt.  All of them are pretty simple.  Cut your spending of frivolous stuff and apply that money to debt.  It isn’t much fun, but it works.  The single biggest issue seems to be getting people to accept that much of their spending is frivolous.  My opinion of frivolous -eating in restaurants, country club memberships, gym memberships, cable TV, multiple fancy cell phones and tablets, private tuition for elementary and secondary education, and fancy vacations.   There may be some areas that would justify private schools, but Oldham County isn’t one of them.

In my opinion, the most money is wasted on cars and houses.  Do you really need a $50,000 car?  If the car you drive impresses your neighbors – you live among snobs.  And if you measure your status by the size of your house, than you too are a snob.  Expensive cars and houses also drive up other living expenses such as property taxes, utilities, and insurance costs.

Don’t get me wrong – if you can afford fancy cars, houses, and lots of pricy things – go for it.  I’m just talking about going into debt to have them.  If you can have all the fine things and still save some money – good for you.

The actual execution of the formula however is very difficult.  Serious debt may require 5 years of a very Spartan lifestyle; many people do not have the discipline or strength to execute the formula.  There was recently an announcement that the federal debt was the lowest it has been in many years.  How did that happen?  It is because of sequestration.  Significant cuts (not cuts in actual spending, just cuts in the rate of increased spending) in the rate of spending.  If you are in serious debt and want to get out, personal across the board spending cuts are in line.

As we baby boomers reach retirement age we wonder if we can ever retire.  There is one simple factor that makes retirement not just attainable, but enjoyable; arriving at retirement age with no debt.  If you don’t owe anyone money, it doesn’t take all that much money to live comfortably.