Think before you spend; it’s not as simple as it sounds – The Morning Sun
Two weeks ago, I saw a driver go the wrong way down a one-way street and park in a parking space next to where I was standing. When he came out, I pointed out that he was on the wrong track. He was genuinely surprised and politely replied that it must have changed recently as he had been driving in that direction for years.
This incident got me thinking. Life and circumstances can change at any time of the day. And these changes could certainly have an impact on your finances. That’s why you should keep your eyes open and alert to any situation that might require a change in your drinking habits.
Failure to do so can steer you down a difficult road. Let’s examine such a scenario, hypothetical, of course.
Suppose you desperately need a new vehicle and you fall in love with a vehicle you really can’t afford. Your credit is good, so you ignore the sticker shock and make a down payment. After all, they offer a 60 month payment plan.
This is an example of how auto loan debt swells.
Now that you have your dream car, you decide that your family is outgrowing your current home. So you decide to look for a bigger one.
It’s a frustrating experience because when you pull into the driveway for an open house, you find it just sold out.
So you go around to your second choice. You like it and make an offer, only to find that another couple has outbid. Of course, they pay way more than the asking price.
But wait! You find another house you like and make sure you’re the highest bidder. Congratulations, you now own the most expensive house in the neighborhood. This is an example of how mortgage debt has skyrocketed.
Soon you realize you want upgrades and new furniture. This requires several trips to the local hardware store and furniture store. You are lucky enough to get great financing terms, making you an example of how credit card debt gets out of control.
In real life, well-meaning households encounter financial difficulties because multiple financial decisions often result in stressful situations.
We have become a society carrying astronomical debt at all levels. The Federal Reserve Bank of New York recently reported that household debt jumped an alarming $1 trillion in 2021.
It now exceeds $15.5 trillion, a figure that is difficult to understand. Nearly $11 trillion is mortgage debt and a staggering $1.5 trillion is auto loan debt.
And thanks to inflation, it’s now going to cost more to heat the house, put food on the table, and fill the gas tank. I suspect that many people who lived on the edge could fall into financial disarray. Many won’t even realize they’re in financial trouble until it’s too late.
Some may turn to Uncle Sam for debt relief, but with a national debt of $30 trillion, our uncle has his own financial troubles. As with any debt, interest on the loan must be paid. And each time the rates go up, you have to pay more interest.
You cannot control the trajectory of our country’s debt. But you can definitely control yours. If you don’t, you could end up in the wrong financial direction.
Securities offered by LPL Financial, member FINRA/SIPC. Email your questions to [email protected] Ken is a Registered Representative of LPL Financial. Ken is Vice President of the Society for Lifetime Planning. All opinions expressed are those of Ken Morris. LPL and Society for Lifetime Planning are independent companies. Investing involves risk, including loss of principal. No strategy guarantees success or protects against loss.