Many Americans simply don't have enough money to pay their monthly wants. This is not because items and services cost more than they used to, but rather because due to credit services, Americans separate the notion of payment from consumption, thus disassociating the two in their minds. This is a dangerous process because it gets people in trouble quickly.

An article from a CFP critiques the out-of-control spending of Americans and the future dangers that this poses for the future. A lengthly quote details some of the problem from the perspective of a CFP on the debt-dilemma many Americans are going through right now. (emphasis ours)

The problem is that Americans are now accustomed to spending more than they make. Over 70% of US households at the lower end of the income scale spend more than they make. That’s right—over 70%. Even in the very highest income bracket—annual incomes over $118,800—more than 15% of households spend more than they make.

These are breathtaking statistics. They are even more alarming because Americans no longer have the same government or corporate safety nets to pay for their retirement and health needs. And the national debt is also huge. Over the next generation taxes will have to increase over 50% across the board just to maintain existing entitlement programs.

Why is this happening? It is not because human nature has changed—it hasn’t. It is that we live in a time when it is easy for most people to separate consumption from payment on a massive scale. With credit easily available, people buy now, enjoy their purchases immediately, and don’t think about payment until much later. Scientists studying human behavior tell us people will do this if given the chance, and they have been. Describing in economic or moralistic terms the future problems this behavior is creating is no match for the rush instant consumption produces.

There is no simple solution for this. Many two-income families work long and hard to make ends meet. The solution is having less ends to meet (i.e. less items to pay for and have to cover each month). Again, we're not financial planners or CPA's, but we can tell a problem when we see one. There is no reason for most Americans to be in debt. A family can tithe 10% or save 10% each month and change their lifestyle very little if they are willing to make the necessary changes. Even cutting a cheap item from your daily or weekly routine can make a big difference in the long run.

We're not here to preach to people, but understanding interest and how it works both against you and for you is a big step to overcoming the problem that many Americans find themselves in.

A good rule of thumb is to wait a month before making a significant purchase. This helps ensure that you only buy things you really want and gives you more opportunity to save.


Perhaps our debt calculators can help you out if you are concerned about debt and things you can't afford.