Is it possible to pay off debts too quickly? Anyone who has student loan or credit card debt, or really any kind of debt at all, has a ready answer for this question. He or she wants to be out of debt as soon as possible!
Today, again, we face a headline that, for most of us, is hard to understand: IMF Cutting Budget Deficits Too Quickly. Apparently, the US is getting carried away with its budget austerity drive, according to Carlo Cottarelli, head of the International Monetary Fund’s Fiscal Affairs Division.
Actually, the headline is even harder to understand than one might first think: In fact, the US is not paying down its debt, it has merely slowed the rate of increase in the debt. This deceleration is the trouble the IMF is pointing out, not the fact that debt is still increasing.
Try to personalize this: Suppose my uncle has been unable to meet his monthly expenses, and has been unable to meet them for the last several years. His credit card balances, home equity line, and personally guaranteed loan balances keep going up. Finally, my uncle seems to be getting things together, at least a bit: he is making a little more money, and has just gone on a spending plan to slowly dial back his expenses. His credit card balances are still going up, but just not as rapidly as last year.
Now, my uncle’s banker has said that he’s cut his standard of living too quickly, and he should start spending more! Moreover, this banker is someone who has helped others, but in the end, they always seem to be in debt and can’t get their finances on track. But the banker friend is always there to help arrange more financing.
What can we learn from this?
First, being in debt always attracts the interest of others in our affairs. Payments have to be made, and we are at the mercy of interest rates and earning enough money to keep it all going.
Second, and more importantly, there will always be enablers. Whether the enablers are the payday loan or credit card company, or the IMF, they are there to “help” us with our finances. Yet, their “help” never seems to resolve our debt problem. These people always seem to dress very well, too.
Most of us can only watch in sadness and terror at what is happening to the United States. But in our own lives, we can certainly heed the lesson here, and get out, or stay out, of debt.