Are becoming obsessed with hiding the credit
card statements before your wife gets to the
post in the morning?You do?
Well don’t be too despondent because it would
appear that you are not alone in all of this.
Doesn’t this make you feel better? You feel like
going out and treating yourself to something new
right away!
See, that’s the problem. It appears that the
average person in the US is about $8,000 to
$10,000 in unsecured debt at any one time. Now
for a certain part of the population that may or
may not be a problem but for the average
household it is and the knock on effects of this
could be devastating on the economy.
One of the reasons for this mountain of debt,
it is argued is the difference between the
average wage and the average cost of living,
Basic balance of payments issue in Macro
economic terms and the gap between monthly
income and monthly expenditure in micro economic
terms. In summary, “living la dolce vita!”
Sound familiar? Yes full marks to the guys at
the back, we are living beyond our means and
sooner or later it is going to catch up with us
all big time!
If we take a look at the basic issue at stake
here we have a mountain of debt that the average
person only services the bare minimum of. So
let’s look at the basic mathematics. Person A
has an income of $40,000 per annum and credit
card debt of $10,000 that they clear at the rate
of the bare minimum (usually 5% per month) so
this roughly equates to $500 per month out of a
disposable income of roughly $2,500 per month.
This means that twenty percent of their
income goes straight out of the door to service
existing debt before they have had a chance to
cover the ongoing expenses for the month. Throw
into the mix the unexpected hospital visit, pet
care expenditure or domestic crisis or
automobile problem and before you know it the
problems merely increase
You don’t have to be a fiduciary genius to
spot the potential flaw in this whole exercise.
As a major national charity for the Homeless
once said “we are all a mere 3 missed pay checks
from being without a roof over our heads”. OK
this may be slightly on the over dramatic side
but by studying the information above it is
quite easy to see how very easily this could
happen.
Financial habits like these are all well and
good in days of low interest rate but when the
economy starts to cool and the markets react
badly then we have to change our ways or go
under.
If you are going to do something positive
about this then make sure that whatever decision
you reach, whatever route you plan to take is
the right one for you and one that you see
yourself accomplishing in its entirety.
Don’t let this force you into some rash and
foolish credit debt consolidation exercise that
might cost you more in the long term.
|