Carnival Of Debt Reduction #85: The American Way Of Debt Edition

Let’s start this edition of the Carnival of Debt Reduction with some historical perspective on debt in America. Here are some interesting facts on consumer debt in the 19th century (source).

Before organized consumer credit, there were five major lending sources: pawnbrokers, illegal small-loan lenders, retailers, friends and family, and mortgage lenders.

Indebtedness was common prior to the 1800s. Unfortunately, it was hidden from view in the grocer’s book and the pawnshop ledger, in the butcher’s tab and the memory of friends.

Early levels of national consumer debt were measured in 1858, when it was estimated the nation’s total household debt load was 1.5 billion dollars. By 1890 the level of consumer debt had risen to 11 trillion dollars.

The 1890 census discovered the average household had about $880 of debt and only $475 in annual income. Compare that to 1998 when family debt was $33,000 and annual income was $32,800.

Between 1896 and 1916, short-term household indebtedness increased at rates as high as 15 percent a year, averaging an annual rate of 9.3 percent.

Unfortunately, the article doesn’t say whether the figures are inflation adjusted or not…but that’s not the point. The point is that there was a significant amount of consumer debt way back in history. Now, view this information in light of the fact that bank issued credit cards (as they are used in the current sense) were only invented somewhere around 1950s (read this article for more details).

Let’s think over that for a while before we start blaming credit cards (and/or other credit sources) for our debt. Of course, we should actively complain against unfair lending practices, but I have an increasing feeling that we are shoving our consumerist tendencies under the carpet and trying to shift the blame entirely on the system. I wish we had some historical data on human accountability towards this end.

On a related note, here is a New York Times article that provides some more food for thought: The American Way of Debt.

Without further ado, let us now move on to the submissions for the Carnival of Debt Reduction.

Personal Debt Stories

• I’ve Come a Long Way, Baby! by Tricia @ Blogging Away Debt.

A couple years ago I would have “Bought now, thought later” and I would already have the camera in my hands. Not this time. It’s still there waiting until I’m ready.

• 10 Things That Bring Success in Personal Finance: #2 Pay Off Your Credit Card Debt @ PT Money.

I signed up for my first two credit cards in college (you know, to get the free t-shirt). By the time I left college I had a decent amount of debt and two worn out t-shirts.

General Debt Reduction Advice

• Snowball Debt Reduction: Which Method Is Best For You? by Jeffrey Strain @ Personal Finance Advice.

While the classic snowball debt reduction method is the more rational method from a financial perspective since it means paying the least amount in interest charges, many people don’t view money in a rational manner. They instead view many from an emotional perspective.

• Debt Elimination - Snowball Method by Abdulrasool Sumar @ Debt Consolidation.

…it is easy to feel discouraged by the Highest APR to Lowest APR method because it can take literally years to pay off a particular debt. Your behaviour is more important than the math…

Some Debt Food for Thought

• Promoting debt by Dana @ Principled Discovery.

Unfortunately, the problem is embedded deep within our national conscience. It is about Americans fixated on the present and the newest fad. It is about personal irresponsibility.

• Debt is Slavery, Part 4: Retirement is not about age by MBHunter presents @ Mighty Bargain Hunter.

Debt will kill your retirement. The magic of compounding is there, but it’s evil magic — the compounding is working against you rather than for you. It scrambles your nest egg.

• An Age Old Idea Still Rings True… Just Hard to Accomplish by Katie @ Aridni.

I don’t know of any way around debts when you’re young—school loans, mortgages, car loans and credit cards maybe. Some experts think that investing any money while carrying debt is plain stupid. They’re right if your money is sitting in the bank, accomplishing nothing.

• Disappointed in the Women in Red @ Living Almost Large.

Typically I would be happy for the women in red as people trying to get their fiscal lives in order. But right now after reading this article, I wonder how much progress they’ve really made or will make.

• Payday Loans: No, no, no! Big Cajun Man @ Canadian Financial Stuff.

Don’t feel like this is your only way to deal with this, because these Loan Sharks are not the answer to your financial survival, if anything they are the end of your survival…

Credit Cards and Debt

• Credit Card Fees (Further Motivation For Getting Out Of Debt!) by NCN @ No Credit Needed.

Now, I may not be able to persuade you to give up credit cards forever, perhaps I can motivate you to get out of credit card debt as quickly as you can so that you can avoid the following FEES!

• Steps to Reduce Credit Card Spending by Mr Credit Card @ Ask Mr Credit Card’s Blog.

I recently got to know two friends who used to have problems with their credit card debt and this was what they suggest you do if you have problems with your spending habits

Not Really About Debt, But Related

• Why Even Dave Ramsey Needs to Consider His Credit Score by FMF @ Free Money Finance.

• 5 Steps to Fixing Your Credit Score by Yourself by Amy Pedersen @ Your Credit Score Secrets.

• The Psychology of the Spending Plan by Moorea @ Queercents.

• Dave Ramsey Resources and Links by Samuel Peery @ Getting Finances Done.

• Making Money Work In Your Early Twenties by Matthew Paulson @ Getting Green.

• The 10 Lies you Should Tell your Wife/Girlfriend About Your Finances by Pushpa Sathish @ Forex Reader.

• 10 Alternatives to Credit Cards (for Those Who Can’t Get One) by The Frugalist @ Frugalist.

• Using A Reverse Mortgage To Pay for Long-term Care and Avoid A Nursing Home Darius @ Related to Mortgage.

Click here to submit your article to the next edition of the carnival.