Monthly Archives: April 2013

Consumers consumed by debt

The average consumer may feel far removed from the heated debates concerning the $17 trillion debt ceiling. But the truth is, American households are dealing with plenty of their own problems, and the debt issues weighing down the nation are similar to those facing consumers.

According to US Debt Clock, total household debt in the nation at the moment amounted to about $16 trillion, which means consumers owe almost as much as the federal government. Mortgage debt stands at almost $13 trillion. The conclusion to be drawn is the U.S. population (as well as the government), is addicted to debt. Total debt per family is a staggering $752,000!

Moreover, rising healthcare costs and inadequate retirement savings will likely create challenges for consumers and the retailers that depend on discretionary spending, according to a report from Standard & Poor’s. Most consumer sectors have gained momentum and ratings stability this year, despite softness in the economy and the slow pace of employment growth. S&P expects that trend to continue through 2014, as long as fiscal negotiations in Washington don’t undermine consumer spending.

But by 2015, consumer-related industries may run out of luck. Healthcare costs for individuals, as well as Americans’ need to increase savings for retirement, are projected to create headwinds for the sector.

S&P said sectors related to housing and autos will see the strongest short-term revenue growth compared to other consumer industries. Homebuilders, home-improvement retailers and automakers are projected to enjoy continued momentum through 2014.

Electronics and department stores, restaurants and discount stores were identified as more susceptible to anaemic growth trends after next year.

One of the biggest culprit identified: credit cards. Unlike the US Government, credit card companies and other lenders are not inclined to solve consumer overspending by raising the credit limit. While some card issuers may raise limits in some cases for their best customers, most will simply cancel the card or close the account and demand full payment.

According to the consumer website, average credit card debt per household with credit card debt in the United States is $14,687. The Federal Reserve earlier this year conducted a survey of U.S. households that showed the median net worth of households fell from $125,000 in 2007 to $96,000 in 2009.

Credit card debt is responsible for causing economic uncertainty in America. Many families owe $50,000 or more on credit cards.   They are constantly haunted by calls from credit card companies. Many families struggling to pay their mortgages or put kids through college   say their real problem started with credit cards. The temptation to borrow a few thousand got them rolling into a debt avalanche.

According to one report, almost half of all bankruptcy cases  stemmed from credit card debts. About 80 per cent of them were males. Slightly more than 70 per cent of   bankrupts who cited excessive credit card debts were between 31 and 50 years old. America is a nation drowning in debt.

The common mistakes in financial planning are all, in one way or another, related to debt. Debt and lifestyle go hand in hand in American society. When you use   debt to fund a consumptive lifestyle, not only do you have the consumptive lifestyle   working against you financially, but you also have the additional burden of debt working against you financially. Both should be avoided like the plague!

Avoiding the use of debt is incredibly difficult because the promotion of credit card use has made credit so easy to obtain and the temptation to use credit or debt so overwhelmingly difficult to resist. Credit card companies are spending hundreds of billions of dollars to entice each of us to spend and to use credit with cards that make spending “easier”, and those amounts are a pittance when compared to additional advertising dollars of retailers.

Lending institutions do not want people to pay their credit card debts each month because of the 18% to 24% interest that is earned on that credit card debt.

Today’s Bottom Line

Get out of debt. According to a banker in the banking industry, a person who uses his or her credit card for convenience sake and pays the debt off each month is known as a “deadbeat”.

If you like to know more and would like to learn and share Biblical perspectives on money, we have the perfect tool. Many of these principles are laid out in our successful course, the Scriptural Financial Freedom series. To learn more, you can  download the Small Groups kit from our Store.