The debt trap

Yesterday’s post sparked a lot of interest among my readers so I thought I would follow it with some information about the debt crisis facing many Americans. Here are some statistics being reported about debt in 2019.

  • Consumer debt recently hit over $4 Trillion.
  • Student loan debt is now at $1.5 Trillion. Student loans are second behind the purchase of a home.
  • The average American has a credit card balance of $4,200.00, and the interest rates are going up.
  • The average car payment is now $545.00 a month, and over 7 million Americans are more than three months behind on their car payments.

One result of all this is that 21 percent of Americans have no money in retirement savings accounts. Another 10 percent have less than $10,000, and one-third of the Baby Boomers, those now approaching retirement age, have been 0-$25,000 saved for retirement. It’s not a pretty picture, and it doesn’t have to be this way.

I shared yesterday the plan I used to get out of debt a few years ago. You may not like that plan, but if you find yourself in one of the above scenarios it’s obvious your plan is not working very well! You might want to try something different.

One of the things the amount of debt carried by the average American tells us is that many of us are living way beyond our means. We are buying things we cannot afford. We are living for the moment, instant gratification is our mantra. My parents never owned a credit card. If they didn’t have the money, they didn’t buy it. I wished I had learned that lesson earlier, but I had to learn it the hard way. At least I learned it.

Out of all the numbers above, the average car payment is the one that caught me by surprise. The cost of a new car is ridiculous today. A new pickup truck now costs more than I paid for my first house. Most advertisements don’t even discuss the cost of the vehicle. They either show the monthly payment or what you can lease the vehicle for. They know the average person cannot fork out the cash for a new car, and they also know that for many, if they can afford the monthly payment or lease amount, they believe they can afford the car.

Here’s something to consider the next time you think about financing a new car. Many are now financing their purchase at 60-72 months to get the payment down low enough to afford. In five years a new car will lose about 60 percent of its value, so you’ve paid a lot of money for a vehicle that is worth less than half what you paid for it. It will be worth even less when you trade it in for another new car which is also financed, and the story is repeated over and over. Is it any wonder why there’s no money for retirement?

Two years ago, while I was serving as the Transitional Pastor of a church, I encouraged someone to teach Dave Ramsey’s Financial Peace University in a small group. Part of that nine-week course included an explanation of how to afford to own a nice car, even a new car, without ever having a car payment. It is possible.

Debt is a trap that can rob us of our joy and damage family and marriage relationships. It can close businesses. It can prevent us from doing the things we really want to do in life. It can cheat us out of an enjoyable retirement. We simply must learn to live within our means, clean up any debt we have and begin to invest wisely in our retirement and the other important things in life.

 

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