Photo by Ruth Enyedi
As a certified public accountant in Phoenix, Wilbert Guilfrod wrote Financial Planning for the 99% because he is but one of many finance professionals who want to do something to reverse the harmful economic trends stifling America for the last 50 years.
One of the most obvious among these is the massive culture of debt that has reached an atrocious new high in recent years. America now holds one of the highest national debts in the world, with its citizens holding the highest amount of credit card debt individually.
However, things like the national debt are but one way to measure the economic impact of personal debt among average Americans. It is easy to blame past administrations for the current state of things, but it is a lot harder to accept that one’s own, individual mismanagement of debt had contributed to the problem.
A part of it is not even due to the current system. Sometimes the system is just a symptom of a larger, cultural strain here in America. More often than not, people still have a bad habit of spending money they just don’t have.
The end result is a vicious cycle. Rising interest rates and debt on the national level are seen to go hand-in-hand. Yet as people keep on swiping their credit cards or taking out shady loans, these are then exacerbated by the interest rate hikes.
It’s clear that change needs to come from somewhere, but starting from the individual level will at least point a way out of this spiral.
But What About Inflation?
Some might mention this year’s inflation fears and wonder if any debt reduction (let alone elimination) would really do any good. Where’s the net gain when the repayment of debt only gets piled on by an increase in the proverbial egg prices?
That may be true on the surface, but the relationship between debt inflation and your finances is a lot more complicated than that. Contrary to what certain cynics might say, wage hikes in response to an inflation impact on an economy remain a possibility. And if that happens, you can still have the opportunity to reduce personal debt and come out more financially liberated.
Remember, the economic impact of personal debt has to do with interest, not inflation. It’s best not to confuse the two. You can still temporarily opt for lower-priced goods or reducing expenses entirely in response to inflation. This not only saves you money, but it can also cut back your own contribution to demand which is the main source of fuel for inflation.
In contrast, the only way you can ever deal with debt and high interests rates is to really stop borrowing, stop spending money you don’t have and get debt under control.
The Economic Impact of Personal Debt Can Lead to Very Dire Straits
Photo by Joshua Woroniecki
Grim as it sounds, having national debt and recession risks loom over people’s heads serve a necessary reminder of what happens when those debts aren’t paid. On an individual level, defaults on debt could lead to all sorts of bad endings, including a rock-bottom credit score, repossession of personal assets and homelessness just to name a few.
Things naturally get even more catastrophic on a national scale. America’s credit rating is a keystone in the global economy. If it crumbles from a national default, then that kicks off a financial meltdown that will then not only reverberate back to U.S. citizens, but to those of other countries.
Economists and financial experts are not exaggerating when they say that it sets the world stage for the apocalypse.
Of course, this isn’t to say that the situation is completely hopeless. Imagine if more Americans at least exercised more personal financial responsibility towards their own debts.
Imagine if they actually learned to keep their spending under their control, stop burning cash as soon as they have it and actually not contribute to the ticking time bomb of the national debt crisis.
Worst case scenario: Most, if not all, citizens would at least have better means to confront the fallout of a national default.
Best case scenario: The reduction of debt in personal finances accrues among the population, leading to more breathing room in the wider economy, and higher chances of America’s debt getting under control.
Taking the First Step to Tackling Personal Debt
Photo by Nic Low
It might seem obvious that one needs to start strengthening financial security to cut back on personal debt. That’s not entirely wrong, but it’s not entirely efficient either.
Like it or not, you can start spending less even at your current income level. That remains another way to improve your financial security. Start mitigating the economic impact of personal debt by focusing your money on necessities.
There shouldn’t be a need, or even a threat, of another Great Depression to get someone to start living within their means as well as be willing to make some sacrifices today for the sake of a better life tomorrow.
Debt reduction may not happen overnight, but a mindset that focuses on accumulating savings and then directing those savings towards investments that further help reduce that debt is the light at the end of this dark tunnel.
One does not necessarily need a great deal of surplus income to start working on strategies that improve personal finance (such as income tax management, retirement planning, making the most out of benefits etc).
And the best part: You won’t need to get into more debt for any of it.Want to start building a debt-free future for yourself? Consider getting Financial Planning for the 99% and start benefiting from the financial literacy every person deserves. Get it today on Amazon, Barnes & Noble and the ReadersMagnet online bookstore.
