Why going into debt for consumer purchases is almost always a bad idea Leave a comment

America’s economy is 70% dependent upon consumer purchases. Yet the consumer’s savings rate is only 4.10% amongst all consumers in aggregate. This low savings rate means that a large number of consumers are dependent on debt or credit cards to fuel this level of consumer spending. Depending upon debt, to fund non-necessary consumer purchases is almost always a bad idea. When one goes into debt, he/she is spending their future income. The primary reason is that consumer debt or credit card debt is amongst the highest interest rates. This average consumer rate is now 22.90%. In addition, this interest on this debt compounds, meaning that it grows on itself or compounds. In addition, the consumer good that is being is likely to be worth a lot less immediately after purchasing, and likely worth nothing at all in a few years. When one purchases unnecessary consumer goods with debt or credit cards there is compounded spending of one’s future income on items that are likely going to be worthless in a few years. If you can’t purchase an unnecessary consumer item for cash then “leave it alone”