For this post, I am only going to focus on personal debt; government debt deserves a series of posts all on it’s own and is not as easily tackled as personal finance can be.
Why are so many people in debt? Because we buy too much.
The answer really is that simple. We are a country of consumers. We are marketed to online, in magazines, and on the radio. Our TVs are filled with reality shows that glorify the rich and (not-so) famous. These people have all the best cars, homes, shoes, clothes, toys, and electronics. And now our mantra has become “bigger, better, faster, more” to try to keep up with others, even if our wallets don’t compare to theirs.
We overextend ourselves on credit. We buy homes that we can’t afford. We want to have a certain “image.” We can’t possibly have less than the people we know, we want to have more than them.
It really is a disease that is plaguing us.
Just the other day, I was shopping at my local department store. I saw a woman and her daughter shopping in the toy aisle and their cart was filled to the brim with Lalaloopsy Dolls. They were working from what seemed to be a huge list (there are a ton of these dolls and they are currently “hot”). I could hear them chattering about completing the girl’s collection and being the only girl in class to have each and every doll. I couldn’t believe it! What a waste, spending a ridiculous amount of money just to have more than everyone else.
What we need to do is change our priorities and live more simply. We need to practice restraint. We don’t need every new product that comes on the market just because it “looks cool” or because we’re having a competition with our neighbor to see who has more. Unfortunately, it will take a lot of mental “undoing” to be free from the clutches of the American Consumer Machine.
Not all debt is bad, after all look at the roof over your head – the place you live is probably the result of you have taken on some debt. How long would we have to save before we could have bought a house outright? I’m sure my parents would have got kinda of tired of me hanging around their house into my forties.
If you look outside you might see a car, or a truck – perhaps in the corner of the room a nice flat screen TV. All these may have been acquired by some debt. How many companies would be in existence today without the ability to borrow money – the firms who employ thousands owe their existence to the ability to borrow money to expand. There’s a whole lot of stuff in my life from my laptop which I happily sit and watch BBC Iplayer through a proxy – http://www.theninjaproxy.org/tv/how-to-use-a-bbc-iplayer-proxy/ to my lovely house and car – all would have been much more difficult to obtain without debt.
But unfortunately many of the poorest countries in the world are saddled with a different type of debt which is crippling their development and leaving their citizens in poverty. Much of it wasn’t used to boost a countries economy, it didn’t establish infrastructure improvements or build schools or hospitals. If this was the case the debt may have been serviced properly on the benefits accrued. No, much of this third world debt was frittered or simply stolen by whichever tin pot ruler was in charge at the time. The Western world threw money at countries thinking that would make things right.
There were little benefits to this debt but the repercussions of the repayments have left many countries stranded in a poverty that is impossible to escape. There are the repayments of course and various conditions attached to the payments – further restricting the opportunity to invest in their own country.
The basic problem is much of this debt – much of it from the 1970s was a complete failure – the projects usually achieved little or nothing. We must let these countries have the chance to compete, the shackles of debts from Western inspired ideas should be removed to give them half a chance.