I’ve spoken with quite a few people about the current economic crisis and it seems to me that this is primarily a debt crisis. My question is this: isn’t debt almost always a crisis? When asked how “Main Street” would be affected, politicians, economists, financial experts get that deer in the headlights look and stammer, “Well, um, people won’t be able to, uh, get that car loan, or get the credit to start a new business, or funds to make their payroll.” I don’t know about you, but I’ve learned that debt begets more debt. We need other options, wise options.
Other than going into debt for large purchases (a business, a home, maybe a car), debt is almost always the result of some type of crisis, whether we recognize it as such or not. The main problem, in my opinion is the failure to research, seek out, explore, and use any other option. Always give yourself more options than just more debt.
Here is what I see as the most common reasons people wander into the debt trap. Most fall under the “failing to plan” rule.
1. Decreased income but no change to expenses
This happened to my wife and me when she quit work to stay at home with our first child. Actually, we didn’t have the “same” expenses, they actually went up and I never tried to make extra money. I put off making serious changes to my expenses out of laziness mostly, but it was also the desire to show friends and family that we were “doing okay” financially and new clothes, eating out, and moving into a newer, nicer rental home did that … in my mind. I let debt fill in the gap between where I was and where I wanted to be.