Posted on September 13, 2011
This is a tough article to write. In this space I try to discuss scenarios to which most working people can relate and then give a tip on how to deal with them. This month isn’t a simple matter of giving a tip on budgeting, saving, credit, investing or some other money management technique. It’s about trying to explain in layman’s language a huge problem that threatens our economic well being as a nation. We enjoy a standard of living in America that is the envy of the world, but it’s one which has been built on debt and that doesn’t seem to concern most people. I wish I could blame it all on our public educational system which is failing miserably to teach consumer mathematics, but parents are as much to blame as educators.
To put this problem in perspective, I’ll use an example that is important to all young people. Forget about the anticipation of becoming old enough to vote or buy alcoholic beverages. For most children, the biggest right of passage on the road to adulthood is getting their drivers license and experiencing the freedom that comes with their first car. This is a teaching opportunity overlooked by many parents. If this event is made too easy, the child misses out on many valuable life lessons that not only impact their personal life, but the way they view government later in life.
When a teenager is given a car as soon as they become old enough to drive, it denies that young adult the opportunity to learn the value of patience and it takes away that feeling of exhilaration that comes when you finally get something you want very badly, but have had to wait and work to get. Schools can’t keep parents from overindulging their children, but they can teach the young people about the cost of ownership and I’m not just talking about making the payments.
With a car, comes the cost of fuel, tires, maintenance, inspection, insurance, depreciation etc. If it’s financed, add the cost of interest, which buys nothing but time. The economic lesson not being taught by our schools is that all assets have a cost of ownership. Individuals own homes, cars, boats, recreational vehicles and other assets. Governments own schools, office buildings, roads, bridges, airports, ferries, and numerous other assets that like a teenager’s car must be serviced and maintained. When young people fail to learn about the cost of ownership, how can we expect them to understand the cost of owning a home or car or be savvy enough to elect officials who will be concerned about the cost of government initiatives?
Granted, we live in the most prosperous nation on earth. Our standard of living is the highest mankind has ever known. We are the envy of the world. But what nation wouldn’t be after running up more than $17 trillion in personal, city, county, state and federal debt. Shouldn’t educating our children about the effects of all this debt be mandatory in our public schools? Imagine what our standard of living would be if we suddenly had to pay off the debt? Why do we keep running up consumer debt and urging government to spend more to make our lives even better?
During this election year you can bet candidates will be promising all sorts of perks to entice you to vote for them. I doubt this tactic would work so well if voters realized that nearly every function of government has an ongoing cost that has to be paid sooner or later. Teaching teenagers about the cost of owning a car could be a good way for them to start learning this lesson. Mom and dad aren’t going to be around forever to help pay the expenses. When things come too easily they lose value. We’ll never wean ourselves from debt as long as we live a lifestyle that’s above our means and saddle our children with the bills.
As I said in the beginning, it’s a huge problem that threatens the economic well being of the nation. It’s a much larger problem than can be addressed in a short article like this, or even in a hundred more articles for that matter. But there is a solution. That solution lies with you and me and our children and our children’s children. We must bring common sense fundamentals of consumer finance back to our individual households and demand the same from government.
Our problem as a nation didn’t happen overnight. The massive federal debt has grown the same way an individual’s credit card debt grows a little at a time over a period of years. State and local government debt has done the same. A new program here, an expanded department there, new laws that must be administered, social programs that frequently destroy initiative and create economic cripples are a few examples. We have to learn say no to things we might want but can’t afford. In our households, we cut back on spending when our finances get out of control or we aren’t able to build a nest egg for the future. Government needs to do the same and we need to demand it.
Here’s a tip! Whether it’s an individual household, a city, county, state or the nation, you can’t borrow your way to lasting prosperity. Thomas Jefferson said, “I place economy among the first and most important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt.” Today, the federal debt alone is a staggering $14,000,000,000,000 plus and growing rapidly. It takes over $400,000,000,000 annually just to pay the interest, money which buys us nothing. Think about it! Shouldn’t we be educating our children about this threat to their future, or are we afraid it might expose how we have enhanced our lives at their expense?
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