200197331-002.jpgThe future, so far away, will be good to us when it comes. Of that we are sure. This is America, after all, where we never have to worry about tomorrow. It is our right to have things and we are encouraged to spend—no matter how frivolously—to keep the economy strong. Our government’s reaction to a weakening economy is to send us out, credit cards in hand, to pledge allegiance to the mall. The economic engine hums along even as we are increasingly strangled by debt.

Credit cards, when used responsibly, are convenient financial tools. Unfortunately, the majority of Americans don’t use them responsibly. Our aversion to debt has eroded and instead, we have become comfortable carrying balances and paying interest on our purchases. We pay for things many times over as the balances sit on our cards for years. Once a country of debt payers, we have become a country of debt managers. Rather than calculating whether a purchase fits into our budget, we calculate whether we can manage the minimum monthly payments required for us to retain good standing with American Express, Visa, Discover or MasterCard.

People are using credit cards to purchase lifestyles that they can’t afford, said Todd Mark, spokesperson for the Consumer Credit Counseling Service, a nonprofit organization that provides free credit counseling and debt management. This is dangerous; with each purchase that is not paid in full at month’s end we give up a little bit of freedom. The impact is minimal at first, but as our balances expand, the burden gets heavier until we are being consumed by the very things that we bought to make ourselves happy. Debt becomes progressively harder to maintain and eventually, it spirals to a point where people cede financial control of their own lives to a credit card company. “You are losing options rather than gaining them,” says Mark.

Losing Control
Americans in 2004 spent “$1.04 for every $1.00 of income, falling in total some $400 billion in the red,” according to Kevin Phillips, author of American Theocracy. This has led to a negative savings rate in recent years, a trend that simply cannot be maintained. We are living so far beyond our means that terms like plastic shackles, indentured servitude and debt peonage are frequently used to describe the extent to which we are in the grips of credit card companies.
The consequences of that are very real, as are the effects on people’s freedom. “There are so many implications of having high credit card debt and having a bad credit rating,” says Maureen Nulty, a CPA with Cendrowski Selecky PC. “Many activities are based in small or large part on having a good credit score.” Indeed, credit problems can affect someone’s ability to qualify for a mortgage, get a car or rent an apartment. Most ominously, messy credit can also disqualify someone from a job. Employers regularly review credit scores as part of their hiring process. They see someone with a low credit score as a risk for internal theft, said CCCS spokesperson Mark, and they know that employees who are dealing with a financial crisis will be less productive at work. In a competitive labor market, they have the luxury of choosing a candidate with pristine credit.
It is important to note, too, that it is not always enough to pay your bills on time. Credit scores are numerical expressions of the risk you pose to a credit card company and can be affected by the amount of debt that you carry and the number of cards that you have. The higher the debt and the greater the number of cards, the lower your credit score will be. Each step closer to the credit limit on an account or each application for yet another card will cloud your financial picture. Debt is like alcohol. A glass of wine at dinner may be good, but drink a bottle and you will suffer for it.

With 60 percent of the population living beyond their means and trying to cope with a financial hangover, it is time to realize that a change of mindset is in order. Staying out of debt is a matter of discipline and dignity. It is unacceptable for the younger generation in America to continue to finance their lifestyles at an annual rate of 20 to 30 percent. We must also realize that the interest rates that we pay are buying someone else’s vacation home. We have to be accountable to ourselves and to our families and realize that wealth is built a little at a time, and what we do today will impact how well we live in the future. “You have to budget, you have to plan, you have to look forward,” says Nulty. “Somebody is giving you a loan every single time you swipe that credit card.”

It is very easy to accumulate credit card debt and there are no painless solutions to get rid of it. An impulsive weekend spending spree is enough to get someone into debt that may take years to pay off. For some, it may actually be the beginning of a debt frenzy that leads to financial ruin. But even severe credit card debt does not have to end in tragedy. With discipline, structure and a plan, consumers can chip away at it until over the course of three to five years they are free, hopefully to never make the same mistake again.

There is a lot of denial when it comes to debt. It is hard for people to recognize or admit that they are living beyond their means and they may do so for years before they realize they’re in a crisis. But in essence, it’s simple: if your monthly expenses are more than your income, you will never get out from underneath the mountain of debt. Stop the cycle. Spend only what you have. Don’t borrow against your future for what you think you need today.

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