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Our grandparents had a dramatically different view on finance than we do. They firmly believed if they didn’t have the cash to buy something, whether it be a car, a house, furniture, or even things as basic as heating oil and food, they couldn’t afford it. If they were broke and needed money to eat, they worked extra and found ways to come up with money instead of just casually throwing purchases on their credit cards so that their lifestyle wouldn’t be interrupted. New clothing, toys, and gadgets were actually luxuries instead of things we think we just had to have. People actually said the words, “I can’t afford it” instead of finding ways to borrow the money to make something happen. Something has changed in our society as a whole that’s made debt not a big deal anymore.

Our grandparents and great grandparents thought debt was almost always a bad idea and to be avoided. Now we borrow money to pay for just about everything, even a quick trip to McDonalds! This change in mindset is making us go broke too; consumer debt levels are now reaching levels greater than they ever have been before. Many families are going to face financial ruin from their growing irresponsible use of debt.

The Federal Reserve conducted a study and found that the average American family has increased the amount of debt that it has by 16% over the last four years. A Georgetown study found that 2.5 million Americans each year go and seek the help of a consumer credit counselor each year and that’s only the people actually seek help. There are just as many if not more people who desperately need to see a financial counselor but don’t want to admit that they have failed and instead sit in their financial mess. Perhaps the most shocking statistic of all is that the total amount of consumer debt has quintupled since 1980. At the beginning of the 80’s, the total amount of debt that consumers owe was $355 billion. In 2006 that number ballooned to a whopping $2.4 trillion dollars.

What does this mean for us as a typical consumer? The world’s not going to come to an end if people keep borrowing more and more money, but it does mean that people who frequently borrow money when they cannot afford to do so will face financial ruin by carrying too much debt. Use these statistics as a wake-up call to re-evaluate where you are at with your debts. Do you have a reasonable amount of debt relative to your income? Are you borrowing money for small purchases on a regular basis that most people pay with cash for? Before swiping out that credit card, consider whether or not you really need to make that purchase and if there’s any way that you could do it for cheaper. You don’t need to make radical lifestyle changes, but you do want to be moving ina positive direction with your net worth.



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