Never dismiss those who caution us against rising debt levels as doom-mongers.
Credit cards are the non-stop, high-speed highway to bankruptcy. They offer the opportunity to make large purchases now instead of saving up and hence are so attractive to people. It gives a feeling that we can afford anything we want. The low minimum payments seem reasonable, and easy to fulfill which is the biggest trap associated with credit cards. It makes forget about the high rate of interest being paid; and force the mind focus more on the low minimum payments. There are ever so many desperate victims of their own misuse of credit cards who illustrate the most unfortunate effect that debt can have on one’s finances. They just went along, living with their debt, until the (un)expected happened which put them in irrecoverable financial crisis leaving no way to meet their debt obligations except bankruptcy. Thus money strain took its toll on all relationships.
When one is on a tight budget or fixed income, there are seemingly countless temptations to spend more than he/she actually has, further increasing the debt. This is especially true when the rather humorous maxim is taken into account: "The less money one has, the more he needs to buy." The urge to buy what he doesn't actually need, but what is most likely nothing more than a fleeting desire should be curbed as much as possible so as to avoid depleting his bank account and causing undue grief later, when he learns that such items as those novelty-sized sunglasses aren't nearly as impossible to live without as he first thought
What is the solution to avoid such situation? Avoid credit card debt. They are so seductive as they offer the prospect of instant gratification. Create a budget and live within the means and track spending. To be not at the mercy of an unexpected financial situation keep an emergency fund. Thus if unexpected expenses come up, they won’t be so devastating and let shun the temptation of borrowing. Keep away debt boom which tends to induce euphoria like alcohol or drugs. Debt is a moral as well as an economic issue. Discard the encouragement to become homeowners and thus to take on debt because every debt is a liability for the borrower and an asset for the creditor. Credit which is derived from the Latin word credere means to believe. Who to believe whom in money deal? Nobody turns believer and nobody is believed when debt is not settled. Creditors lose faith in their borrowers, they will demand the repayment.
In the aftermath of the latest collapse the distinction between debt in the private and public sector has become very clear. The idea of using borrowed money to buy assets is the smart road to riches drained the very soil under the foot overnight. All options for dealing with the debt overhang turned unpalatable. Rampant deregulation is just as much a cause as rabid consumerism. Both borrowers and lenders have been irresponsible. Lenders were hamstrung and blinded by short-term incentives maliciously preyed on borrowers. Borrowers were blissfully complicit and happy to be bought off with their own short-term "happiness". Here both parties failed all the while to see the house of cards for what it was. Life was good! Everyone was rich (on paper)!!! . All bark and no bite.
When capital has been lent at extremely low rates and mal-investment was rampant, a trillion dollars spent on empty houses in the southwest American desert bear testimony to the desperation for investment opportunities, applaud those who had the foresight to curtail their spending and escape the universal debt crisis though they are a minority.Perhaps the need to consider defining happiness by and seeking it through things other than material worth and impulsive shopping sprees. Austerity is not such a dirty word, and there's more to life than what advertisements would have us believe.
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