NationStates Jolt Archive

Now, this is just an observation from my own parents (who are american) and well, the statistics that are out there about americans. Do americans not have issues with going into debt?

My parents have a mortgage, car payments, they help me with my schooling and yet they're rennovating the house and are constantly in debt.

Personally, I would figure "Ok, get the house and cars paid off and the kids to school and only do necessary repairs to the house until everything is under control" yet they go and rennovate and buy new furniture (hopefully I'll get to bum their old stuff off them when I get my own place.)

And then there are the stats about how few americans actually own their house, car et c and the personal debt is so high et c.

I wonder if it's a cultural thing, other people (other canadians) seem to want to pay off the house before improving on it and not go to debt up to their eyeballs.

Debt culture is becoming more common, and is still as short sighted as ever.

I fail to understand why people have to have a new car or a luxury holiday now, and are willing to pay twice or more in total than they would have to pay if they saved the money first and bought later.

Yes buying a house does tend to require obtaining credit from somewhere, but this is relativley low cost and the alternative to buying is usually rent. So nothing is gained by not borrowing. However, keeping that older car for a couple more years while you save for a new one is good financial sense (so long as you maintain the old car properly of course).

What is normal here? In Brazil the upper middle classes tend to live beyond their means. This means that they are constantly looking to roll debt over. The working classes are wiser, and tend to only use credit facilities when absolutely necessary. (Medical, housing). The rich don't need credit, they just pay cash anyway. The middle and lower middle classes are unpredictable, some, like myself and my family do without rather than borrow, others aspire to the ostentation of the upper middle classes and get themselves into real difficulties.
Overall, the majority (working class, most of the middle class and the rich) do not live in debt (except mortgage), whilst the few keep the financial sector very wealthy indeed.

What do you think boosts the growth of American GNP and GDP? Consumer spending. If Americans stopped buying stuff en masse and started paying off all their debt, the US economy (and the economy of any nation that is reliant on feeding the consumer beast) will suffer.

while you do have more freedom if you pay as you go, you would also be severly limited in what you can do if you insist on no debt

your parents would be living in an apartment

you wouldnt get an education (or it would be considerably prolonged as you paid for it yourself)

they might be able to afford to buy an 8 year old car outright.

yes its stupid to float debt for vacations and toys. esp debt that isnt going to be paid off in under a year. (we got an 18 months no interest deal when we bought the son a new laptop for xmas)

but it takes both extremely good dicipline AND lack of financial disaster to keep out of debt.

I think Dakini differentiated between 'good' debt and 'bad' debt. Mortgage debt is generally considered good. So is a reasonable amount of education debt or car loans.

Other debt, especially credit card debt, or home equity spent on frivolous consumption, is b-a-d.

http://money.cnn.com/2003/10/02/markets/consumerbubble/