According to recent data released by the Federal Government, the amount of outstanding consumer debt rose from $2.46 trillion in July to $2.47 trillion in August. Furthermore, we experienced an overall increase of $12.2 billion, which is the highest increase we have experienced since May.
Financial experts had estimated that debt would rise by 3.7% during this time period, but the reality is that it increased by 4.7%. According to financial analysts, this rise in debt indicates that consumer really didn’t feel the need to be cautious despite the problems the financial markets experienced during that same time period. As Moody’s Economy.com financial expert Ryan Sweet stated about the information, “They provide further evidence that consumers did not pack it in following the events.”
The data further demonstrated that the type of debt that was most responsible for the rise in debt was revolving debt, which is the category under which credit cards fall. When isolated, the amount of credit card debt actually rose 8.1% in August, which amounts to $6.1 billion.
This unabated increase in consumer debt is, in my opinion, a true reflection of our society. In the past, people tended to wait until they had the cash before they made purchases. Today’s “please me now” society doesn’t want to wait. I don’t think this is necessarily a bad thing, as long as you understand your limits.
My dad was recently diagnosed with cancer and, while facing his own mortality, he started to reconsider his spending habits. He has never made a purchase until he had the cash to cover it. As a result, he waited many years for some of the things he has long wanted, such as installing a swimming pool. He told me that his cancer diagnosis made him rethink his spending habits, as his unwillingness to borrow money resulted in him having far less time to enjoy his pool.
Of course, I’m not encouraging people to go into debt and to spend irresponsibly. Rather, you need to weigh the pros and cons of getting something now as opposed to waiting for it. When making this determination, think about how much it will cost you to borrow the cash as opposed to waiting and decide if the added expense is worthwhile.