You know, with all of the talk about the government and our bad economy, I sometimes think that we're missing the bigger picture. I hear people worry about the deficit and how much we're spending as a nation. I hear people worry about social programs and military spending and Medicare. I know all of this has problems, but, honestly, I don't think any of that is the biggest issue facing the US. I think our biggest problem is personal debt.
I was talking to a friend about his money problems (said friend confirmed I could use this in the blog, just not to use his name). He has a mortgage on his house that is taking up 35% of his monthly take home income, and that isn't counting his property taxes, house repairs, or insurance. His student loans are another 25% of his monthly income and he has a car loan that takes another 15%. Like with the house payment, the car payment isn't covering his insurance, tag, or any repairs made on the car. He has quite a few credit cars and pays about another 10% if his income on those.
So . . . before he ever pays his utilities or buys food or gas, he is putting 85% of his income towards debts. My friend makes a good living and his take home income is fairly nice . . . at least by my standards. However, due to all the debt he's in, he feels like he has nothing. Most months, he ends up having to put some food/gas payments on his credit cards, which means even if he's paying on them every month, he's never really lowering his balance.
Now, my friend wanted me to point out that he doesn't feel sorry for himself and he doesn't want anyone else to either. He made stupid decisions when he was young and put himself in this bind. Currently, he's trying to find ways to reduce his debt amounts, but isn't having an easy time of it. He's a smart guy though, so I'm thinking he'll find a way.
My friend's situation may seem extreme, but sadly, it's not. There are a lot of people in the US who are trying to pay off student loans while keeping their cars running and roof over their heads. I'm not saying anything you don't already know here, nor am I trying to get you to feel about this fact one way or the other.
Well, okay, I am, but just to say this . . . while we live in a society where most people are constantly in debt, we have very little disposable income. Without this disposable income, we're not buying things the way we could. We're not hiring contractors to fix our back porches and we're not hiring maids to help clean the house once a week. We're not going into the coffee shop for an extra coffee and a cookie. We're not picking up a new book or a new comic book or going to see a movie just because we liked the title.
As long as our money is completely tied up, we're not going to be able to spend the money needed to jump start the economy the way it needs to be. If spending isn't happening, no new jobs will be created. Without new jobs, our unemployment rate is still going to be high.
I will admit, I don't know what the solution is here. I honestly think that when the big bank bailouts happened, we would have been better off just giving every US citizen a million dollars to get out of debt. The banks did nothing with that money except squander it. I think the average citizen would have put it to better use. Once they paid off their debts, most of us would have invested it in sustainable things like houses and cars. We could have had stable neighborhoods instead of vast areas of abandoned houses.
Alas, we didn't do that and right now, the government is so overdrawn, it CAN'T do that. For the moment, the best we can do is just try to keep our heads above the waves.
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