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The Traps of Debt Consolidation for Debt Management American Version of Debt Management
The American version of debt management seems to be; buy now, pay later, or worry about it later. “Instant gratification” has replaced “save for a rainy day” as the watch-word for Americans regarding their money.
Most American households do not have savings. They simply live paycheck to paycheck. They pay what has to be paid THIS WEEK, balance the checkbook, and decide how to blow what's left....and those ARE the responsible ones.
The irresponsible ones get a paycheck, do what they want to do, buy what they want to buy, and if there's anything left, they use it to pay the bill that is most pressing at the moment. Neither method could be called responsible debt management or sound financial planning by any stretch of the imagination.
Saving money is rapidly becoming a lost art form in America. In a recent study, only 41% of all American households actually had savings accounts, but 75% of all American households are carrying substantial debt.
This is certainly not the kind of money management that our grandparents would have approved of. There was a time when being in debt was a shameful thing but that idea went the way of the Model A, apparently.
Declaring bankruptcy became so easy, and so many people were taking advantage of it, that Congress finally had to make it more difficult. Debt management businesses are thriving, and you can't turn on the TV without seeing an advertisement for debt consolidation loans.
Americans need to return to the sound financial practices of the past, like save first. American mothers and fathers need to instill the basics of debt management into their young ones. American high schools need to require that a course in financial planning and debt management be successfully completed before a diploma is awarded.
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People who work as debt management experts go to school for that sort of thing. Many spend four years or more getting college degrees that identify them as experts in the money and debt management fields. And they are experts, there's no doubt about it.
The best of the debt management experts and debt management teachers, however, are those who have learned to manage their personal finances and their personal debts, and then passed that knowledge along to their children.
Those who actually do it are the experts, and they are the ones that we need to learn from to avoid having to visit with a well-educated debt management expert because we have gotten ourselves into financial hot water.
As I look around at expert debt managers (those who successfully manage their own finances) I find that they have many things in common. They don't all do things exactly the same way, of course, but the structure in which they manage their finances is basically the same.
1. They save first. Those people who know how to save very rarely get into financial trouble. Sure, they can. Life can throw some pretty hard curve balls....the loss of a job or a major illness. But unless their financial trouble is caused by an outside force they will not get themselves in debt up to their eyeballs.
2. They live within their means. They do not base their spending upon what their friends have. The neighbors might buy a new car, but that will have no bearing upon whether they do or not.
3. They all have budgets. Not only do they have budgets, but they live within the constraints of that budget. They do not make impulse buys. If asked, they could tell you how much is spent each month on food, shelter, clothing, utilities, and transportation. |
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Not really! It would be nice, of course, if everybody suddenly became excellent debt managers and such nasty little things as late notices and harassing phone calls by bill collectors became things of the past.
If everybody only took on debts that they could pay on time and in full each and every month, the debt management companies and the consolidation loan companies could just fold their tents and slip away into the night. That hasn't happened, and there isn't any indication that it
is going to happen in the near (or far) future.
More and more people are finding themselves in financial holes more and more often today. When discussing this situation with a group of my peers, the consensus was that instant gratification and less than adequate financial education are the two principal causes.
In days gone by, parents taught their children about financial responsibility. Children were given small allowances and then instructed how to spend it. They were required to save 10%, give 10% to charity, and to make sure they had enough to cover their necessities until allowance day came around again. If the kids ran short, they were not allowed to dip into their savings. They simply did without until allowance day. Mom and dad did not pony up to cover the shortfall if junior had blown his allowance on ice cream.
There was no such thing as instant gratification. If a kid wanted a bicycle, he had to save for it. It didn't just appear because he begged mom and dad for it.
It really is time for parents to again begin teaching children about financial responsibility and debt management, and the schools need to do their part as well. We have become a nation of borrowers without a plan to repay our debts. |
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