Many Americans are waking up to the fact that they have overspent, and that debt is breaking our collective backs. I spoke to a couple yesterday, who in recent years, had enjoyed a lifestyle well beyond her means. Today, they have a mountain of consumer debt as a result of living a lifestyle of “Yeah, why not get it, we have the money”, and are now faced with some serious realities. Their home is worth only half what they paid for it 5 years ago, making their mortgage balances exceed 100% LTV. They have in excess of $50,000 in credit card debt, and are driving new cars to work that were purchased within the last 12-24 months. They are beginning to see the fallacies in the self-convincing rationalization of “I like nice stuff”. They told me if either of them lose any of their monthly income, they will begin missing payments. This is a story that is playing itself out over and over across our great country. Luckily for this couple, they’re starting to see it and are beginning a plan to change course.
I guess we could spend time looking for a place to lay blame. Yet, while we may be correct in identifying some of the cultural programming that has led us all down this path, we must recognize that we as individuals are ultimately responsible for our respective positions, and with that, ultimately responsible for finding our way out. For some, that “way out” may take several years of hard work. Getting out of debt and changing behavior doesn’t happen overnight.
Congratulations if you have recognized the pitfalls of the past. I am right there with you. We have to bring back the culture of personal responsibility and sound planning. We have to be determined to break our habits of “I like nice things” consumerism, and begin living well within our means. Personal savings is at an all time low, that’s a great place to start effecting some real change!
As we each develop a plan to get ourselves back on track, let me encourage you to pay serious attention to your children. The selling of unsecured credit doesn’t stop with you. Many Banks and Universities have joined forces to entrap our children in just the same way we have fallen prey. As an example, Michigan State University gets $1.2 million a year (guaranteed $8.4 million over seven years), according to its agreement with Bank of America, to let them market and sell debt creation tools to our kids. The contract calls for a $1 royalty to the university for every new card account that remains open for at least 90 days, $3 for every card whose holder pays an annual fee, and a payment of a half percent of the amount of all retail purchases using the cards.
Yeah… oh my goodness is right!
Read the NY Times Article here
Keep in mind this is just one example. All across the country, lenders are lining up at Admission Offices, ready to sell our kids credit cards, knowing this naive demographic is the easiest to sell. To make matters worse, Colleges and Universities are developing revenue streams by allowing lenders to do it. Should you be upset and lash out at the banks and educational institutions? Why? In a free society, if someone is willing to buy, someone will be ready to sell.
The better course is to teach your children the pitfalls you have experienced. Give them the fighting chance to deny the path of debt creation and to avoid the traps of consumerism laid out before them. Knowledge is power, and I urge you to take the time to understand how to take control of your own situation and then pass those lessons on to your children. Their futures depend on it.
