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Is Normal Good?

Is Normal Good?
April 23, 2020 Torrey Park

The United States has the highest amount of debt ever recorded in its history. It is currently towering over eight trillion dollars. Although the U.S. isn’t alone.  There are many other nations with large amounts of debt, however, the way other nations view and associate with debt is different from how the U.S. views debt. Unfortunately, the U.S. tends to normalize debt.  As a nation, we take away any negative associations with debt. Given debt isn’t all bad, but it should only be used when absolutely necessary. Most of this country’s financial problems are blamed on its leaders. In order to eradicate this issue, it’s going to take more than the nation’s leaders implementing new plans. Our entire country will need a shift in financial behavior. I think it’s helpful to first look at what other countries believe about debt.

 

In many other cultures debt is frowned upon, and they use this to keep their citizens from falling victim to debt. The Islamic nation forbids its people to borrow money with accrued interest. This is so strictly followed that some have even gone to the lengths of not getting loans from places because of the interest rate. I believe small actions like this speaks volumes, about their beliefs around debt. Jewish culture has similar beliefs.  They believe that you should only use the necessary debt to get what you need. One difference is that they believe no interest should be charged between two Jewish people. Even some African cultures are so against debt that they refuse to get loans with high-interest rates because of how it will impact their family’s image. With so many examples of other cultures being against debt, I believe somewhere along the line the U.S. may have missed the mark.

 

The normalization of debt in the U.S. starts at an early age, unintentionally, by our parents. One example is something as innocent as a trip to Chuck E. Cheese or Dave & Busters. These entertainment centers were set up for kids to have fun playing arcade games. There’s an underlying effect that happens when we allow our children to play there without properly explaining to them how it works. We give our children a card with money on it that we’ve paid for, and they use the card to play arcade games until it is empty. In most cases the kid runs back to their parents begging and pleading for them to add more money on to the card. Only to go spend all of it again and the cycle continues until the parent puts their foot down refusing to spend any more money. This could possibly create negative behaviors with money.

 

If you think about it, it kind of sounds like a young adult who gets a credit card their freshmen year in college without considering how they’re going to repay the credit card company. They make frivolous purchases and after having their credit card limit increased fall into the same trap. Or they acquire another card and do the same thing with it. It’s a safe assumption that in cases like these, the individuals were not taught the importance of managing their finances or the consequences if they don’t.  Another debt that young people typically fall victim to is student loan debt. Students are told that they don’t have to pay their student loans while in school. Students are oblivious to the fact or don’t care that they are accumulating large amounts of interest on that borrowed money in the entire process. Some doctors complete their education with $190,000 to $210,000 in student loans by the time they’re done with school. It would probably be better to encourage new college students to pay their student loans while they can, not necessarily pay them off every year but pay as much as you can before you graduate to minimize the amount of money they spend on student loan debt. These same behaviors are poured into our adult life where people are encouraged to buy new cars, sponsor Christmas on your credit cards, and do everything you can to keep up with the Jones’s.

 

Debt is a huge problem in the United States, but we as consumers have to first take the initiative to correct it and not pass our bad habits on to the next generation. It starts at home, meaning teaching your children as early as possible about money and how it works to ensure a stable financial future. That doesn’t mean your child should be an investor at three years old or that you should hold a financial seminar at your next Dave & Buster’s outing, but you want to gradually teach them about being responsible for how and why they borrow money. Next don’t be afraid to look in the mirror and address your own financial behaviors. Determine where you can improve your money habits and concur with the debt in your life. Next, establish a financial plan to increase your savings and pay off debt, those two objectives are the keys to making yourself financially independent. Lastly, we have to promise ourselves that we’ll only get the necessary debt. Adopt the ways of other nations and turn down loans with high-interest rates. The best way to turn our nation around is to first change your own mindset and those of the people around you.  You must better your own financial situation before you can focus on others’ situations. Prosperity Connection believes that everyone should be financially independent, we tirelessly work to put ourselves out of business with the intention that eventually no one will use us for financial education because they already have it. If you want to start your savings or debt reduction plan, I encourage you to reach out to one of our 5 financial coaches. As long as you are on the journey we want to help you achieve it.

Robert Nelson V, Financial Education Coach