After you read this I suggest you go to HumbleDollar and read some of the comments- link below.
Richard Quinn | Apr 11, 2023
AN ARTICLE PUBLISHED in The Wall Street Journal told the story of Americans in their 30s who are spending heavily and piling on debt as we leave the pandemic behind.
One family with an income of $80,000 in Lincoln, Nebraska—where the cost of living is low, with housing costs 22% below the national average—had $20,000 in credit card debt and $160,000 in student loans.
They used stimulus checks to work down their credit card debt. The couple claims to have saved money during the pandemic, but it’s not clear if that was actual savings or merely saving 20% by buying something on sale. I’m guessing the latter because unplanned spending—on a new water heater and health care expenses—has lately gotten them even deeper into debt.
Taking the family of six to Walt Disney World and other local trips probably had something to do with a doubling of their credit card balance to some $40,000. An online calculator shows that paying the minimum of $635 a month on that credit card will result in $200,000 in interest payments over 30 years.
The wife seems confused as to how this can happen, “a never-ending cycle of playing catch-up,” as she is quoted as saying. Who created this cycle? What will they do when the student loan repayment moratorium is lifted?
I was ready to write something a bit snarky about this couple and other 30-somethings in similar situations, but then I thought it’s really quite sad. When I was in my 30s with four children, the idea of going on vacation to Disney World wasn’t even on the radar. We lived without credit card debt, not because we had lots of cash, but because we abhorred debt—and still do.
In short, we lived well within our means and, back then, it was on my income as an office clerk. How could a family that’s heavily in debt receive government payments, which they use to reduce debt, and then voluntarily double their debt? The real kicker is they don’t seem to understand what they’re doing to themselves.
I wish the article had discussed their retirement savings—or lack thereof.
Some people will see their student debt as part of a national crisis. I see it as making poor choices or failing to leverage the value of their education. Making $80,000 a year from an education that left them $160,000 in debt seems like a poor investment. Perhaps a critique of the cost-benefit of college, or the way that education is put to use after graduation, is in order.
Their vacation took priority over not only debt repayment, but also building an emergency fund. Hence, we can guess where the money for the water heater and medical bills came from. Credit cards. With this pattern of living, the family will never catch up.
I can’t say such financial decision-making is typical, but I doubt it’s unusual, either. Different generations view spending and debt quite differently. Shared life experiences determine attitudes. It seems to me that each generation—especially since the 1960s—creates its own set of excuses. Market crashes, inflation, the pandemic, recessions and job losses are all given as excuses for not saving.
Adverse events have affected all generations. It’s the individual’s response that determines how someone gets through these setbacks—by, say, skipping an expensive vacation. Cutting costs, even on basic expenses, seems to be a forgotten strategy.
No doubt some people will disagree, but the decisions made by this couple—and perhaps many of their generation—seem self-destructive.
Read more by Richard Quinn on HumbleDollar.com
QUINNSCOMMENTARY 
Random quotes from the Humble Dollar…
1. “There are Boomers where I work who have enough money, but refuse to retire to make way for the younger generation.”
2. “However, those of us who do not go deeply into debt benefit from our irresponsible neighbors. Their excess spending fuels the economy and the share prices of the companies we invest in.”
3. “One simple rule: “Live on less than you make.”
Everything else flows forth from this simple rule.”
4. “Credit is what made this country great” (my Dad.)
5. https://pbs.twimg.com/media/BP3GguTCQAAFrde.png
1 & 2 Nicely illustrate the fallacy of composition, that what is true for one person may not be good for the whole. The usual example is one person standing in a stadium to get a better view. If ALL people stand, no one gets a better view. Saving is good? but excess spending fuels the economy.
3. Ignores the life cycle hypothesis that people naturally (and logically?) tend to even out consumption throughout life, by borrowing when younger, for education and raising family; saving in middle age when income is higher, and spending in retirement.
4. Is what my Dad told me when I was a whippersnapper. It sort of combines 1-3, imagine if everyone saved until they had the cash to buy a car. (I think he stole this from someone else, like a lot of his other “wisdom”
5 is me.
LikeLike
You can say that again!
Sorry for the double post. It didn’t show up on my tablet, but shows on my phone (twice)
LikeLike
You can go into debt for college, for a house, vacations, cars, appliances and just about anything, except for retirement. The discipline needed to stay out of debt for items which depreciate throughout a lifetime, is the same discipline used to save for our late lives.
LikeLike
Couples this is what makes Dave Ramsey and people like him money with their tough love.
Once upon a time, it was very hard to get credit cards and they came with very low limits. But the banks figures out that the risks were low to themselves by issuing credit cards to these people. Banks are greedy and want to help these people get into impossible debt. The banks may be partly complicit in this, but it still comes down to personal responsibility. The same goes to government students loans. Government and the educational cartels ARE COMPLICIT in convincing people to take these large loans with little rate of return on the value of their degree. But it is still up to the person signing the loan to get value for their debt and to pay it off.
Over the last few decades there have been too many bailouts and not enough people being tossed to the street to serve as a warning to others. The only ones I see on the street are drug addicts and mentally ill people, not people who made bad decisions with their money.
As for charging a vacation on a credit card, I would never plan a vacation that wasn’t fully paid full before I start it.
LikeLike
Random quotes from the Humble Dollar…
1. “There are Boomers where I work who have enough money, but refuse to retire to make way for the younger generation.”
2. “However, those of us who do not go deeply into debt benefit from our irresponsible neighbors. Their excess spending fuels the economy and the share prices of the companies we invest in.”
3. “One simple rule: “Live on less than you make.”
Everything else flows forth from this simple rule.”
4. “Credit is what made this country great” (my Dad.)
5. https://pbs.twimg.com/media/BP3GguTCQAAFrde.png
1 & 2 Nicely illustrate the fallacy of composition, that what is true for one person may not be good for the whole. The usual example is one person standing in a stadium to get a better view. If ALL people stand, no one gets a better view. Saving is good? but excess spending fuels the economy.
3. Ignores the life cycle hypothesis that people naturally (and logically?) tend to even out consumption throughout life, by borrowing when younger, for education and raising family; saving in middle age when income is higher, and spending in retirement.
4. Is what my Dad told me when I was a whippersnapper. It sort of combines 1-3, imagine if everyone saved until they had the cash to buy a car. (I think he stole this from someone else, like s lot of his other “wisdom”)
5 is me.
LikeLike