Consumer Debt

When a person goes out into the public, they commonly see things for sale, most of which they do not need. While most people have the knowledge not to buy things which they cannot afford, some people will buy it anyway using credit. While there are many forms of consumer debt, credit is the most common and expensive, as the magic of credit cards and their capabilities continue to evolve. While consumer debt has been around since before money, it has been rising exponentially among Americans due to lack of knowledge and cultural norms. Many people of the United States lack financial knowledge and simply do not know how to avoid debt and its emotional effects. In a study taken at colleges around the United States, 77% of students recorded paying
some portion of their tuition on a credit card (Norvilitis). Credit card companies have begun using college campuses as a way to attract students to try credit cards. They even put their school logo on the card to try and encourage students to open an account (“Consumer Debt”). Many students also find it much easier to swipe a small, portable card than to go to a bank and attempt to take out a loan. With the advances in technology, it is easier than ever to purchase things with credit, whether it be with a card, on a mobile device, or simply a number printed on the card.
With credit cards being so simple to use, people often underestimate the amount of time it will take to pay off the loan with interest.
Over two thirds of people under the age of twenty four realize they do not know enough about finances, and are losing money because of it (Norvilitis). The reason young adults lack this knowledge is because schools rarely have financial classes. Even if such classes are offered, students see few reasons to take them, as getting accepted into prestigious colleges may require classes like math and science instead of those. Another problem is the parents, who do not teach their kids enough about finances and how they work. Children rarely seem to have the knowledge growing up about the importance of finances, saving money, and being cautious with spending your money. When it is not taught at school, it becomes the responsibility of the parents to assume that role, a role that many times is not filled. Without the correct knowledge, many children grow up lacking the thought of keeping track of their expenses, paying taxes, and putting money into
savings.
With the lack of financial proficiency, many begin to experience not only financial problems, but emotional as well. Suicide rates alone have been increasing over the last decade due to financial stress (Norvilitis). With the common person being unaware and uninformed of interest rates and how they work, they begin to lose money very quickly. Often times the interest stacks up so quickly, people do not realize it until it has accumulated to be thousands of dollars that they cannot afford (“CONSUMER VIEW: Debts of Despair.”). At this point, stress and depression begin to set in. Depending on the person and the amount of debt, different levels of depression creep in, causing some people to take medication or go to see certain doctors on a timely basis. In rare cases, if they cannot seem to get control of their financial or emotional problems, some people believe there is no other way out, and take their own life. Although this is extreme, it shows how much damage these issues can do to people in the communities. With many people misinformed, consumer consumption has increased constantly since the release of the credit card, with the American society continuously encouraging citizens to purchase luxury items.
The debt to income ratio has almost doubled in just one year, from 2005 to 2006 (Krishna Dutt). Much of this can account for luxury items. People in this era feel a need to have certain things that they desire, and often times, they will purchase it with the swipe of their small, plastic card. With many new ways to advertise, whether it be on a billboard, a commercial on television, or an advertisement online, people are exposed to so many appealing products that they feel the need to consume. People also feel the pressure to keep up with societal norms. If a certain product gives you a certain status among your peers, many consumers will feel the need to buy it. For example, iPhones are a popular product, and although expensive, many people who should not be able to afford it purchase it anyway, for the status among their friends. There are also many new technological advances that consumers feel the need to update, whether it be for work, hobby, or simply because they want the newest product. Companies have begun to realize this and have been releasing new versions of certain products at an alarming rate. With inflation, these products become even more
expensive.
The problem is, inflation is increasing at a faster rate than the wages of an average American worker. This makes it even more difficult for consumers to continue to buy items, as they become significantly more expensive and their wages increase marginally. With the inflation, people slowly begin to buy less and, “It has shown that if credit availability does make consumers borrow, stagnation will be averted in the short run. However, in the long run the effects of increasing consumer borrowing are ambiguous because, by increasing consumer debt, it redistributes income towards the rich who have a higher propensity to save” (Krishna Dutt). When the rich choose to save more, the socioeconomic gap continues to widen, and people spend even less. Because of this, the economy slows down drastically, which can result in things like an economic crash. With lack of knowledge and pressure of cultural norms at an all time high, consumer debt has been rising exponentially among Americans. With so much accessibility and ease in purchasing whatever your heart desires, the problem of debt will only continue to get worse. It is the responsibility of not only our government and education systems, but also parents and elderly to help educate young, thoughtful individuals about finances. It is in the best idea of our country that every person is financially educated and stable, so that everyone can live a calming and peaceful life.