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Financial Planning & Money Management -- Who's Really Responsible For The Debt Crisis In Our Country?

Mar 29, 2008
If you're like a lot of people living in the U.S. today, you probably haven't saved nearly as much as you can or should at this point in your life. Whatever the reason may be -- and there are plenty of reasons or excuses -- saving money is a discipline that too many of us have ignored, forgotten, or never learned. Overall, the working population in our country has recently been experiencing a negative annual savings rate. A negative savings rate simply means we are spending more money than we earn, and we're borrowing the money to make up for the shortfall.

The U.S. economy has long been known and admired as one of the greatest consumer economies in the world. We are privileged to live in "the land of opportunity." But we have also become accustomed to believing that opportunity is something we should expect rather than respect, and too many of us have squandered our personal financial resources in favor of instant gratification. In short, we have become spoiled.

In recent years, we've seen numerous lending companies and financial institutions offering a variety of interest-only loans and other creative come-ons to entice us to buy things we really can't afford. As of this writing, we are facing economic recession in part because of the huge problem with overextended mortgages and other bad consumer debt. We have allowed ourselves to live beyond our means.

Lending companies will always look for new ways to make money at our expense. But it is our personal responsibility to commit to such offers only if we understand the consequences and are willing to accept responsibility for the commitment. Have you ever heard the term "caveat emptor?" It simply means: Buyer beware. Remember it, and the advice will serve you well. Risky financial products and services wouldn't exist if enough of us were smart enough not to buy them.

The situation has become so untenable that our federal government is now stepping in to help those of us who committed to mortgage loans we couldn't afford and the finance companies who offered them. Who do you think is going to pay for it? Is it any wonder that the real estate market has suffered? And why do you see so many advertisements for companies that will help you get out of credit card debt for less than you owe? Just like the mortgage crisis, credit card debt has also become a serious and growing problem, and if you're in their target audience then you are also part of the problem.

Abdicate your personal financial responsibility now, and you will eventually pay the price later when you seek credit for a new mortgage or need financing for some other important obligation. Ultimately, we all pay the price for those who neglect responsibility or mismanage their debt obligations. The last thing any of us should do is look to government agencies for help. (After all, how good are they at managing our money?) Look in the mirror, first. And if that doesn't help you come to your senses, then think of your family's future.

It's a house of cards... The U.S. dollar has crashed on the world market because the Fed has had to drop interest rates to compensate for our bad habits and internal economic weakness. Such a condition doesn't make investment in the U.S. dollar attractive to anyone on the global stage. As a result, the U.S. stock market has also followed suit in the decline... Where do you have your 401k or IRA retirement savings? I'll bet it's primarily invested in the U.S. stock market. Historically, that's a good long term choice, and there's no reason to suggest that it won't be in the future. Recessions will come and go. But if we continue to let our debt obligations get out of control, our financial future will certainly not be a comfortable one.

What can you do? ...Save before you buy. Learn from past mistakes. Stop relying on credit cards, and don't commit to anything you may not be able to afford now or pay for in the future. Take on a second job if necessary to pay off your existing consumer debt. Create your own personal financial plan and stick to it. Set up a budget that works within your plan, live within your means, and look for sound opportunities that can satisfy your future financial needs within your ability to save and your tolerance for risk. Never expect or ask anyone else to "bail you out" of a bad personal decision (especially the government). Look before you leap, and take responsibility for your own actions or inactions before you blame someone else for your misfortune.
About the Author
R. Gunnar Gelotte is a semi-retired Phi Beta Kappa honors graduate of the College of William & Mary in Virginia, with over 25 years experience as a corporate controller and personal money manager. He currently resides in Nashville, Tennessee. For an easy and comprehensive way to help you plan for and manage your personal or business finances, visit: MyMoneyManagementTools.com
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