A Guide to Personal Finance

Image via Wikipedia

Your parents and grandparents have told you all along how to protect your money, and gain assets.  The question is, where you listening?

Limiting and eliminating debt is the first step financial independence.  Personal debt has skyrocketed in the last 30 years.  The reason for this is multifaceted.  At the root of the matter however, there are two basic reasons for this debt explosion.

First is the change in attitudes of the American public.  In the years preceding World War II, Americans were a very conservative lot.  With the memory of The Great Depression still fresh in their minds, Americans were quite frugal indeed.  They spent on only what was needed at the time.  This attitude proved fruitful as personal savings were at an all time high in America.  Since that time Americans have gotten more selfish, much more selfish.  Marketers have been successful in convincing the public to buy the things they want, and to buy these things right now.  Americans responded by acquiring possessions at a blistering rate, and increased their personal debt to get them.

Second are the lending institutions.  Banks and financial institutions allowed the public to increase their debt exponentially through relaxed lending policies, and the increase of revolving (read credit card) debt.  Financial institutions abandoned the conservative lending guidelines they had been practicing for decades.  They moved swiftly toward a more relaxed lending style which place the responsibility of personal debt square on the consumer.  They did this because the government allowed them to change the lending and collecting laws for credit card debt.

The financial institutions had forgotten that they bear a responsibility to their consumers to help keep them out of financial trouble.  Banks collect a great amount of statistical data.  When this data is analyzed it shows trends in their customer’s behavior.  Consequently, they can predict with a reasonable amount of certainty at what point a customer will become overburdened with debt.  In short the bank knows when you have enough on your plate, and should guide you to keep you financially sound.