With consumer debt at an all-time high and a recession that is impacting most Americans, it’s more important than ever for consumers to take a hard look at their household balance sheets.
According to reports, consumer debt stands at nearly $2.6 trillion dollars. This doesn’t even include debt secured by real estate. But just how does this American consumer debt break down? As of June 2008, roughly 37 percent of all consumer debt was categorized as revolving credit, which is defined as “credit which is repeatedly available as periodic repayments are made.” The most frequent form of revolving credit is credit card debt. The other 63 percent of that debt is drawn from loans that are not revolving in nature. This type of debt includes automobile loans, student loans and personal loans.
In an interview with SUCCESS Magazine, Suze Orman offered some helpful financial advice to help Americans get their finances back on track. Orman is known for her best-selling books and Emmy Award-winning financial-advice show and was deemed one of the world’s most influential people by Time magazine.
Orman’s emphasis: Setting strong priorities that don’t forget the people in the equation. “The United States of America would not be in the situation it is right now if we had really cared about people first,” said Orman. “We would have had the strength to say to them, ‘You can’t afford this mortgage; we’re not going to lend you money you’re never going to be able to pay back.’”
But most of the time, there isn’t somebody their to guide your financial habits. To heal your wounded piggy bank, Orman offers this advice:
– Don’t buy things unless you have the money. Don’t buy things on credit unless you know you have the money to pay off the bill.
– Don’t expand your business unless you have the money to do so. Especially in tough times, it might make more sense to stay small and save up.
– Realize people are the key to everything — money can’t do anything without people. Make sure your decisions will benefit, not harm, the people involved.
– Think about and understand what you’re doing — and why — with your money. If you’re not sure why you have money in that one account, do some research and find out how to make your money grow without risking your savings. Don’t passively accept a broker’s suggestions without understanding his or her reasoning.