Feb 21, 2020 4 min read

Several financial reports caused concern recently. According to the Federal Reserve, total household debt rose by $601 billion last year and surpassed $14 trillion for the first time. The last time the growth was that large was 2007, when household debt rose by just over $1 trillion.

Economists said credit cards have surpassed student loans among younger borrowers. Student loan balances remain high, as the cost of higher education continues to rise faster than regular inflation.

The data shows that transitions into delinquency among credit card borrowers have steadily risen since 2016, notably among younger borrowers,” according to Wilbert Van Der Klaauw, senior vice president of the New York Fed.

According to Nerd Wallet, Americans owe nearly $7,000 per household and pay nearly $1,100 in interest each year. Fewer say they pay their balance in full each month. Credit card interest rates are some of the highest in the nation.

It is like dealing with a legal loan shark. Interest rates are sometimes as high as 16 to 17%. Miss a payment and your rate could go to 29%. Paying the minimum can take years to pay off the balance.

Probably the only credit cost higher than credit cards come at rent-to-own stores. I tell clients if a place has a sign in the window saying “no credit check,” they should not go in. Unfortunately, people with bad credit get lured in because it looks like a solution. If you calculate the interest rate of all of your weekly payments, you may be shocked. It also encourages people to get an even bigger television; it’s only a few dollars more per week.

Try to find a way to save to make this kind of purchase.

Equally concerning is a new survey by Salary Finance, which found that 32% of families run out of money before their next payday. This is true of most pay ranges, including those earning more than $100,000 per year. People with higher incomes often believe they can just buy more even if they do not have a written financial plan.

Running out of money forces some people to go without their medicines and other necessities. As with most things, there are often many contributing factors. Baby boomers have lived a life in which they’ve often wanted things immediately, not waiting until they could afford them. Some of these traits continued with Generation X and Millennials. Many people hate the thought of a budget.

Make a list when you go shopping and stick to it if money is tight. Shop at stores that offer the best value. Think about maintenance and operating costs when making purchases like cars and trucks. Have an emergency fund to cover unexpected needs. Review cell phone and cable bills. Many people spend $400 or $500 a month on these items.

Do you really need to go in debt when the next model comes out? Is your current phone working well?

The other thing you can do is increase your income. With today’s low unemployment, there are help-wanted signs everywhere. Some companies have increased wages because of supply and demand. You also can learn new skills that can help you get a better job. Minimum wage jobs were never meant to be lifelong jobs.

Make a plan and stick to it. You can improve your family’s financial life and reduce your stress. It will be well worth the effort.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.