Financial Update

Americans are spending with plastic at a staggering rate. Consumer credit-card debt has almost tripled over the last two decades—from $238 billion in 1989 to $800 billion in 2005, according to an analysis of Federal Reserve Board data by Demos, a national research and consumer advocacy group. The average American family now owes more than $9,000 in credit debt.  In addition, credit companies are mailing out a record 6 billion credit-card offers last year (according to Mail Monitor, a market research group.)            The increase of consumer debt has been the result of several things; mainly an increase in the cost of living and a stagnation of real (inflation adjusted) wages. A consumer group called Center for American Progress suggests that costs for food, energy, and housing and other costs have been rising at an unprecedented rate. Along with increasing costs are the tantalizing credit offers which appear in the mail. Lenders are becoming predatory with their advertising extending credit to practically everyone.  They knowingly extend credit to those who they know will have a struggle to pay the debts off. This allows the company to make far more in interest charges. The result of this has been a dramatic increase in bankruptcy. Consumer bankruptcy filings continue to increase, with Chapter 7 liquidation filings rising 54% in the second quarter compared to the previous three months. Consumer bankruptcies had plunged following the passage of a tough new bankruptcy law last year. By the second quarter, however, the pace of filings had picked up to 2,200 to 2,300 new filings per business day, more than four times the level in November 2005 after the bankruptcy law went into effect.
            These trends are not good and threaten the health of the general economy. The solutions to these problems are complex but achievable. Individuals need to do all in their power to increase income, decrease expenses, and protect themselves with appropriate insurance, and of course avoid debt like the plague.