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Minggu, 27 Oktober 2013

Making Sense Of Consumer Debt

By Rachael Gutierrez


Our economy seems to be in more danger each passing day. As it becomes worse, consumer debt is on the increase. Many once affluent communities are now facing bankruptcy and/or foreclosure. Many are in despair because they do not know what to do. Agencies that offer possible solutions to these problems are also growing in number.

Businesses and organizations are not included in the statistics for this type of debt. Only individual financial problems are included. It focuses on items that do not appreciate their worth over time, in other words, consumable items. Mortgages are not always included even though some studies include them because they have such a large impact on personal finance.

A lot of this spending is considered to be unjustified. In other words buying something that is not essential. An example would be spending for a large screen television even though you could easily get by with the small television you already own. However, many families today are going into financial ruin for essential items like food and medicine. It is the only way they see to survive.

Short term loans like credit cards and pay day loan type businesses are huge contributors to this personal finance problem. Consumers see them as short term solutions. However, they fail to realize the long term financial ramifications. Some suffer from the need for instant gratification. They are not willing to wait and save up for something they want. Others, on the other hand, see these short term solutions as the only way they are going to make it from paycheck to paycheck. They dig themselves into an even deeper negative financial situation.

This trend has led to an increase in businesses of payment consolidation and credit counseling. These organization offer ways to manage credit or to consolidate payments owed. They give personal options, and usually help their clients pay off their financial obligations in just a few years. Some also teach credit repair and money management techniques.

Surprisingly, this personal debt can be a positive thing for the economy. People spending more on consumable items leads to a larger demand for those items, and hence more jobs for those items to be made. Domestic production is significantly increased. Others use this money to start their own small business or to improve some aspect of their current working condition. Unfortunately, these benefits for the economy are usually only on a short term basis.

Most households average thousands of dollars owed for personal finances. Others, many who are compulsive over spenders, can owe into the tens of thousands of dollars. Often short term loan businesses charge much higher interest rates to those persons who have more serious financial troubles. This has the effect of causing an even stronger strain on their finances and their ability to pay back the money.

Consumer debt does not appear to be something that is going away anytime in the near future. With a materialistic society and with some living literally from paycheck to paycheck, it is bound to go up. People are going to have to take greater responsibility for their financial welfare if we are ever to see a significant decrease in this substantial financial problem. If not we will see even more bankruptcy and foreclosures in the future.




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