Living With Credit Card Debt and Other Consumer Debt - A Society in Crisis

Mike Killian, November 20, 2005

Living With Credit Card Debt and Other Consumer Debt- A Society in Crisis PDF Print E-mail
Written by Mike Killian   
Sunday, 20 November 2005
 By Mike Killian, CardRatings.com Credit/Debt Management Reporter


How I love this job. It constantly allows interaction with the most informative, intelligent and influential people and materials. My newest assignment was no less an event as I was able to review an incredible report, Living With Debt. The work was commissioned by Lending Tree and authored by Dr. Robert D. Manning. Besides hosting his own site, Credit Card Nation, Dr Manning is the author of CREDIT CARD NATION: The Consequences of America's Addiction to Credit (Basic Books, 2000) and heads the Department of Finance at Rochester Institute of Technology.  I was able to interview Dr. Manning. He suggested that we have become a society of abundance, which dramatically reduces our ability to be motivated. Older generations dealt with the scarcities of the depression and World War II. It created within that generation a deep rooted desire to help their children and grandchildren to have a better life. And that generation succeeded to the point that our society wants for nothing today.

But there has been a price for this affluence and it is spelled out in the referenced study which every consumer should read. Its predictive message is not only powerful and insightful, but alarmingly accurate as it depicts the trends and values of 6 life stages: College Students, Singles, Young Families, Maturing Families, Empty Nesters, and Senior Citizens.

Some of the findings of the study include:
  • Living with significant levels of debt has become an acceptable part of everyday life.
  • Many people attribute their willingness to go into debt to a dramatic increase in spending on children and grandchildren.
  • Attitudes toward home ownership have changed dramatically from simply providing shelter to becoming the perfect investment.
  • Financial literacy, particularly about borrowing, credit and debt, is extremely lacking.
Dr Manning endorses the concept that credit is far more accessible today on multiple levels thanks to a multitude of financial products.
"Financing a product today is more profitable than producing it."
Dr. Manning also referenced the phrase credit crunch, stating that rising home values have temporarily distracted from our society's credit problems. In his study he states, "We are living with increasingly higher levels of debt, which has become an accepted and normal state of affairs."

Elsewhere in the report he poignantly claims that "much of the traditional social and cultural views of good debt versus bad debt have been influenced by mass marketing to Baby Boomers and their children and grandchildren, many of whom expect or feel pressured to pursue immediate gratification over traditional values like 'saving for a rainy day'".

The opposing forces of an increased "credit crunch" and our society's negative savings rate have led to a very strong potential for crisis. Just how far can the rubber band stretch?

Dr Manning feels very strongly that we need to empower ourselves by becoming more literate as to good debt versus bad debt. There are hundreds of financial products available today and we as consumers must educate ourselves about these products and discipline ourselves. We must become a more savvy financial consumer. We must also diversify our investments so that we do not depend on real estate as our only source of future wealth.

The commissioning agency, Lending Tree, offered a very appropriate summary of the strong need for financial literacy today:
"Changes in the lending environment, coupled with changes in the bankruptcy law, means it has never been more important for Americans to develop their financial literacy skills."
We welcome your comments about debt and investing issues in our popular credit forum!

Click here for the LendingTree Guide to Smart Borrowing.


Mike Killian has been writing about credit and debt management issues that are of importance to consumers for over 8 years. He formerly served as the Guide to About's credit site, which was recognized by Forbes Magazine's "Best of the Web" for 5 of the last 6 years. Mike has also offered debt elimination seminars to businesses and community colleges for many years.

Mike offers free consumer advice on the CardRatings.com Credit Forum as well as on his own site, FreeMoneyTraining.com. While at his site, you can view additional articles as well as his schedule of upcoming seminars.

CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

Last Updated ( Sunday, 20 November 2005 )

 

This story ran on on November 20, 2005.