As we continue to recover from the last recession, there’s a lot of optimism for the future. We see unemployment numbers going down and the economy buzzing.
While optimism is strong, there’s a storm brewing. Something massive is forming out in the Atlantic, and this time, it just might be the storm of the century. No one knows when it will strike, but when it does, it will push millions of Americans over the cliff.
That storm is the next recession.
A lot of it has to do with the record high amount of personal debt we have. Almost every category you can count in the trillions of dollars.
-$1.02 trillion in credit card debt.
-$1.4 trillion in student loans.
-$1.22 trillion in auto loans.
What’s worse is a lot of us have debt in more than one of these categories, so we’re paying high interest all the way around.
What’s Going on With Our Budgets?
It’s not just debt we have to worry about. Consider the amount of money we have saved. It was recently said that most Americans don’t even have access to $400 if they really needed it in the event of an emergency. So, what happens when, not if, the economy fails?
The University of Chicago released a new study that revealed 44% of Americans avoided going to the doctor when they were sick/injured last year. That’s almost half the country! The reason? The high cost of health care!
If we can’t afford to take care of ourselves now when the economy is on a massive growth-spurt, what happens when the next recession hits? No one will be ready for the storm, which may cause a health crisis in the near future.
That brings me to my next point. When the economy is showing signs of upward trends and people are optimistic, that makes them feel safe. Of course, we all want that brand new shiny car sitting in the driveway of our beautiful home, but these are luxuries we can barely afford when things are going well.
We have to put ourselves in a heavy amount of debt and pay interest that’s tough to afford. As the economy continues to churn in an upward fashion, so do the interest rates. During the last recession, they might’ve dropped to 3%, but it wouldn’t be out of the question to see the rates rise to as much as 7%.
Over the next few years, that increase will make their almost unaffordable car loan definitely unaffordable, killing whatever savings they might have.
Doom and Gloom
The point of this blog isn’t to be a doom-and-gloom preacher who screams from the street corner that the end is coming. No, I want to encourage everyone who reads this to take the opportunity to get their debt under control before taking on new debt.
Yes, the signs point towards high optimism, but we just don’t know when the next storm will hit. If you’re going to survive the next recession, you will do it because you were prudent, have all your ducks in a row, and valued saving your money over buying the latest shiny toy.