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Debt is the REAL Reason Why Your Personal Recession May Last For Years

From WalletPop.

"The recession may have officially "ended," but chances are your financial struggles are far from behind you."

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"...there's another reason that many of us are going to feel cash-strapped for some time to come. Simply put: Americans are very quick to rack up debt, but slow to pay it off.

And unfortunately, our decades-long love affair with credit and over-consumption won't easily come to an end.

The Numbers on Debt are Dead Wrong

In recent months, we've gotten word that consumers have started paying off debt and saving more money in response to the Great Recession. But those reports largely proved to be unfounded – or misleading at best.

For example, a lot of the hoopla about reduced credit card debt turned out to be much ado about nothing. While it's true that the totals for credit card debt have gone down, it's not because people have starting paying more money toward their bills.

In fact, just the opposite is true. People haven't been paying their credit card debts, leading banks to write off those debts as uncollectible. So the real reason for the reported drop in credit card debt is charge-offs from banks' balance sheets – not payoffs by consumers."

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"But if we're all doing such a better job of saving money, you'd think savings in other areas might budge too. Yet that's not happening. For most other categories of saving – whether it's saving for our kids' college education or for our own retirement – Americans' savings accounts are severely under-funded.

Why? The truth is that Americans are still borrowers to a far greater extent than they are savers. And in every category of borrowing, consumers are taking more time to pay off their obligations than in previous years."

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"It's all this debt that holds us back from saving and investing for the future. If your home was under water, and you didn't plan to move anytime soon, you probably wouldn't care.

But if you're a cash-strapped homeowner who wants to borrow against your property, it's a different story. You can't borrow because the equity simply isn't there. And thus, you're feeling financially pinched. Your personal recession is alive and well.

As a nation, we're drowning in debt. And without smart financial planning and improved financial literacy, it's going to take most people a very long time to get rid of all these bills."

See? Frugal living pays.

Posted by Cute at 6:49 PM

Labels: economy, financial (non-tax)