Living Beyond our Means

Credit seems one of those wonderful things in life that can help people make ends meet in difficult times. The financial system is one of mankind’s greatest creations when we think about it because it enables us to leverage other people’ savings to invest in and produce new things. Think about it: we may not trust some of our neighbors and yet in search of some kind of return, through banks, we lend money to and borrow from people we never met. The problem with credit however is that most consumers today use it regularly to increase their spending rather than leveraging it judiciously in difficult times. Consumers have been increasing the use of credit across the world (see chart) and millions of people today struggle every month to make payments on high interest credit cards. The credit card industry is excellent at peddling its wares but the credit crisis afflicting consumers is something that each of us needs to take responsibility for. Let’s face it, unlike previous generations who led modest lives, the new generations have become spoiled, we want it all, we want it now and living beyond our means has become a dangerous addiction. As with all addictions the cure will be long and painful and admitting we have a problem would be a good first step in long journey.