Does Your Family Have An Appropriate Debt Limit?

Families, communities, and nations are stronger when they maintain appropriate debt limits. Families and communities have more difficulties raising their debt ceilings than the federal government. The federal government is the only organization of the three listed that can print its own money. However, families, communities, and nations all have big problems when they spend more money than they earn.

In his article at The Deseret News, Jay Evensen compared individual families with the current struggle between the White House and the House of Representatives to settle on an appropriate debt ceiling. 

Each of us has a debt ceiling, set mainly by the bank-imposed limits on our credit cards or the things we can use as collateral. But there are many more ways to borrow money, from bank loans to home equity lines of credit to applying for even more credit cards or calling to ask for a higher limit.

And we’re doing all of that, apparently.

While we’re sitting at home passing judgment on profligate politicians in Washington, the Federal Reserve Bank of New York’s Center for Microeconomic Data has released its latest report on total household debt for the first quarter of the year. The news isn’t good….

But, getting back to household debt, the New York Fed says this was the only time in the 20-year history of this report that debt has not dropped during the first quarter as compared to the last quarter of the previous year. Americans tend to overspend for the holidays, then pay off a good portion of that after the New Year. Not this time.

Total household debt now stands at $17.05 trillion, which is $148 billion more than the previous quarter and $2.9 trillion more than at the end of 2019.

Inflation is, of course, the prime suspect. Reports say we’re getting pay raises, but they aren’t big enough. Civilian workers got about 5.1% more on average last year, but inflation was 6.5% for the year, with food up by 10.4%, according to the Bureau of Labor Statistics.

To make up the difference, we’re putting more everyday stuff on credit, which is a really unwise thing to do. That’s especially true considering Bankrate.com reports the average credit card interest rate was 20.3% as of May 10.

Some people have little choice. They can’t afford to eat or drive without a credit card, if they’re lucky enough to have one. Lower income brackets always get whipsawed the most by economic troubles, left with few choices or strategies. They deserve the most consideration, but rarely get it.

But for the rest of us, it looks as if we’re not having many debt ceiling discussions at the kitchen table.

Inflation in the United States is way too high, and it causes rising costs in all categories. It also affects retirement accounts, which are losing thousands of dollars. The reality is that there may be a deep recession or even a depression in the near future.

Wise families will hold debt ceiling talks to decide where they can save money and pay down debt. A family that has no debt can sleep better at night and feel more peace during waking hours. Debt-free families strengthen their communities and states, and debt-free communities and states strengthen nations.