Spending way above our means has become a disease affecting the majority of our nation. We live in a buy now, pay for it later, instant gratification, society. So much different from our grandparents (our parents may not have been born early enough), who would not purchase anything unless they had the money to do so and in fact,those who are of that generation, are rarely seen with a credit card. They pay cash or use a debit card.
So why has this debt become such an issue?
Credit cards have never been easier to get. Once you are 18 you can apply. There are no lessons on money management at school, This is crazy, You wouldn’t send your troops to battle without any weapons so why not arm the kids with the information they need to stay debt-free and live a less stressful existence?
The youngsters get their cards and then spend, spend, spend. Only having to pay a minimum amount back is so appealing and there is little realization of the implications of doing that. Once they hook them they hook them and the interest charges will be lost and ignored on the statement. Put a warning just like on the cigarette packets…
WARNING.YOUR INTEREST CHARGE THIS MONTH IS…$.
The parents will have no say until their child needs to be bailed out. Too late! This pattern of overspending carries on into adulthood. Want that house to look good and fool others that you are very successful? Trying to compete with your friends? Most don’t realize it’s not just about the mortgage.
What about the 2 cars, the annual vacations? Let’s put it on the credit card or line of credit and pay later.
But what if that ‘secure’ job is no longer? Have you an emergency fund? Covid 19 is a prime example, Businesses and jobs wiped out in an instant and financial hardship descends and damages as lethally as a hurricane.
Now let’s look at our Government? What example are they setting?
Debt,debt,debt!
Since 2008, America’s national debt has surged nearly 200%, reaching $27 trillion as of October 2020. In Canada since 2007/08, combined federal and provincial nominal net debt has grown from $837.0 billion to a projected $1.5 trillion in 2019/20. net debt is expected to equal 64.3% of the Canadian economy or $39,483 for every Canadian.
Greece went bankrupt in 2009. Government spending had been rising since Athens hosted the 2004 Olympics. (They couldn’t afford it yet the prestige the event would bring the country, was too hard to resist). I was in Athens when people were lining up at the banks trying to get their money out. Most were unsuccessful. Greek debt has stabilized at $402 billion. Incredible.
That’s just 3 examples. Virtually every country in the world is in debt,
The country with the least debt……Brunei has a debt to GDP ratio of 2.46 percent among a population of 439,000 people. So what is the solution? Well, it certainly has to start with the younger generations. Money management skills must be introduced to the school curriculum. It is such an important life skill along with social skills. (another topic schools should teach and don’t).
Increase the minimum age to get a credit card to 21 and make the requirements for approval much more difficult for everyone. Get the banks to lower the credit limits for everyone. Increase the minimum payment required to keep the account open and suspend the credit faster if those minimums are not met over a shorter period.
Give higher rates of interest for money saved and incentives to keep the account in the black.
Make mortgages harder to get and have the agents go through a thorough list of expenses associated with the property so their clients won’t be mortgage poor. Base it on the higher salary, not on both. Have stores give discounts for cash and debit payments. Hold your federal and local government more accountable for producing a balanced budget. Cut the waste. If we have to do it when money is tight then why shouldn’t they?
Just hoard it until you can afford it!!