Financial Life

For the first time ever, total credit card debt in the United States is approaching a trillion dollars. Instead of learning painful lessons from the last recession, Americans continue to make the same horrendous financial mistakes over and over again. In fact, U.S. consumers accumulated more new credit card debt during the 4th quarter of 2015 than they did during the years of 2009, 2010 and 2011 combined. That is absolutely insanity, because other than payday loans, credit card debt is just about the worst kind of debt that consumers could possibly go into. Extremely high rates of interest, combined with severe penalties and fees, can choke the financial life out of almost any family in no time at all.

These days, most Americans use credit cards for various purposes, and they can be very convenient.

And if you pay them off every single month, they don’t become a problem.

Unfortunately, a lot of people are not doing this. According to CNBC, total U.S. credit card debt rose by an astounding 71 billion dollars last year alone…

Last year, credit card debt in the U.S. surged by approximately $71 billion to $917.7 billion, according to a new study from CardHub.com. The research also found that most of the debt accrued in 2015 came in the fourth quarter, when Americans tacked on more than $52 billion.

“With 7 of the past 10 quarters reflecting year-over-year regression in consumer performance, evidence is mounting to support the notion that credit card users are reverting to pre-downturn bad habits,” CardHub CEO Odysseas Papadimitriou said in a statement.

And as noted above, things were particularly gruesome during the 4th quarter of last year.

According to Alternet, Americans added more credit card debt during those three months than during the entire years of 2009, 2010 and 2011 combined…

Not since we headed into the Great Recession of 2008 have we been quite so loosey-goosey with our credit cards, racking up debt with stunning speed. Of our 4Q totals, CardHub notes, “during this one quarter, we added more debt than in 2009, 2010 and 2011 put together.” That brings dollars owed to credit card companies by each debt-saddled American family up to $7,879, the highest since the Great Recession.

I can’t even begin to describe how unwise this is. When I was in my twenties, I made the same mistakes that so many other Americans are making right now. I very foolishly racked up large balances on my credit cards, and it took years of extremely painful payments to fix those mistakes.

In America today, 37 percent of all households maintain credit card balances from month to month, and the average level of credit card debt for those households is $15,700. The following comes from CBS Minnesota…

According to NerdWallet, 37 percent of American households have credit card debt, which is defined as not paying off the full balance every month. Using data from the Federal Reserve of New York, U.S. Census and its own poll, NerdWallet found the average balance for those in credit debt is $15,700.

What most people don’t realize is that by letting balances run from month to month, you can end up paying just about as much in interest as you did for the original purchases.

Here is one credit card repayment scenario that comes from NerdWallet…

For the sake of simplicity in calculating the cost of the average credit card debt, let’s assume an APR of 16% and a fixed payment. We’ll also assume a minimum payment of 2% of the principal balance of $15,762, the average as of the end of 2015, or $315.

Based on those terms — and assuming you don’t add any more to your credit card balance — it would take 84 months, or seven years, to pay off the balance in full. During that time, you’ll pay $10,402 in interest — about two-thirds of the original balance — for a total of $26,164. This averages out to about $124 in interest per month.

The scenario above assumes that all payments are made on time. But a single late payment can trigger higher interest rates, penalties and fees that can be absolutely suffocating.

In fact, some people end up paying back three, four or five times as much as they originally borrowed to the credit card companies.

If you use credit cards for convenience or to buy things online or to automatically pay bills, that is fine. Just don’t let balances accumulate. As you can see, that can be financial suicide.

And as we head into a new global recession, you definitely don’t want to be saddled with high levels of debt. All of us have little luxuries that we can cut back on, and now is not the time to be living on the financial edge.

Just look at some of the troubling signs that we have seen in the news in recent days…

-The U.S. oil and rig count just dropped to the lowest level ever recorded

-One Houston CEO told employees that he was laying off that we have entered a “depression”

-It is being reported that 35 percent of all oil and gas companies around the world are at risk of falling into bankruptcy

-Unemployment in Canada just hit a three year high

-The number of job cuts in the United States skyrocketed 218 percent during the month of January according to Challenger, Gray & Christmas

-U.S. manufacturing activity has been in contraction for four months in a row

-U.S. factory orders have now fallen for 15 months in a row

-Subprime auto loan delinquencies have hit their highest level since the last recession

-Orders for Class 8 trucks in the United States dropped by 48 percent on a year over year basis in January

-The Restaurant Performance Index in the United States has dropped to the lowest level that we have seen since 2008

-Major retailers all over America are shutting down hundreds of stores

And this list does not even include all of the signs of severe economic trouble from around the rest of the planet that I have been writing about lately.

Credit card debt truly is financial poison, and it is not something that you want to have during the hard times that are coming.

Unfortunately, most Americans never learn, and they continue to rack up credit card debt as if there is no tomorrow even as the global economy starts to spiral downhill all around them.

Once upon a time, the United States had the largest and most vibrant middle class that the world has ever seen. Unfortunately, that is rapidly changing. The statistics that you are about to read prove beyond a reasonable doubt that the U.S. middle class is dying right in front of our eyes as we enter 2012. The decline of the middle class is not something that has happened all of a sudden. Rather, there has been a relentless grinding down of the middle class over the last several decades. Millions of our jobs have been shipped overseas, the rate of inflation has far outpaced the rate that our wages have grown, and overwhelming debt has choked the financial life out of millions of American families. Every single day, more Americans fall out of the middle class and into poverty. In fact, more Americans fell into poverty last year than has ever been recorded before. The number of middle class jobs and middle class neighborhoods continues to decline at a staggering pace. As I have written about previously, America as a whole is getting poorer as a nation, and as this happens wealth is becoming increasingly concentrated at the very top of the income scale. This is not how capitalism is supposed to work, and it is not good for America.

Today I went over to Safeway and I was absolutely appalled at the prices. I honestly don’t know how most families make it these days. I ended up paying over 140 dollars for about two-thirds of a cart of food. That was after I “saved” 67 dollars on sale items.

When the cost of the basic things that we need – housing, food, gas, electricity – go up faster than our incomes do, that means that we are getting poorer.

Sadly, if you look at the long-term numbers, some very clear negative trends emerge….

-The number of good jobs continues to decrease.

-The rate of inflation continues to outpace the rate that our wages are going up.

-American consumers are going into almost unbelievable amounts of debt.

-The number of Americans that are considered to be “poor” continues to grow.

-The number of Americans that are forced to turn to the government for financial assistance continues to go up.

After you read the information below, it should become abundantly clear that the U.S. middle class is in a whole heap of trouble.

The following are 30 statistics that show that the middle class is dying right in front of our eyes as we enter 2012….

#1 Today, only 55.3 percent of all Americans between the ages of 16 and 29 have jobs.

#2 In the United States today, there are 240 million working age people. Only about 140 million of them are working.

#3 According to CareerBuilder, only 23 percent of American companies plan to hire more employees in 2012.

#4 Since the year 2000, the United States has lost 10% of its middle class jobs. In the year 2000 there were about 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.

#5 According to the New York Times, approximately 100 million Americans are either living in poverty or in “the fretful zone just above it”.

#6 According to that same article in the New York Times, 34 percent of all elderly Americans are living in poverty or “near poverty”, and 39 percent of all children in America are living in poverty or “near poverty”.

#7 In 1984, the median net worth of households led by someone 65 or older was 10 times larger than the median net worth of households led by someone 35 or younger. Today, the median net worth of households led by someone 65 or older is 47 times larger than the median net worth of households led by someone 35 or younger.

#8 Since the year 2000, incomes for U.S. households led by someone between the ages of 25 and 34 have fallen by about 12 percent after you adjust for inflation.

#9 The total value of household real estate in the U.S. has declined from $22.7 trillion in 2006 to $16.2 trillion today. Most of that wealth has been lost by the middle class.

#10 Many formerly great manufacturing cities are turning into ghost towns. Since 1950, the population of Pittsburgh, Pennsylvania has declined by more than 50 percent. In Dayton, Ohio 18.9 percent of all houses now stand empty.

#11 Since 1971, consumer debt in the United States has increased by a whopping 1700%.

#12 The number of pages of federal tax rules and regulations has increased by 18,000% since 1913. The wealthy know how to avoid taxes, but most of those in the middle class do not.

#13 The number of Americans that fell into poverty (2.6 million) set a new all-time record last year and extreme poverty (6.7%) is at the highest level ever measured in the United States.

#14 According to one study, between 1969 and 2009 the median wages earned by American men between the ages of 30 and 50 dropped by 27 percent after you account for inflation.

#15 According to U.S. Representative Betty Sutton, America has lost an average of 15 manufacturing facilities a day over the last 10 years. During 2010 it got even worse. Last year, an average of 23 manufacturing facilities a day shut down in the United States.

#16 Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs.

#17 Most Americans are scratching and clawing and doing whatever they can to make a living these days. Half of all American workers now earn $505 or less per week.

#18 Food prices continue to rise at a very brisk pace. The price of beef is up 9.8% over the past year, the price of eggs is up 10.2% over the past year and the price of potatoes is up 12% over the past year.

#19 Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.

#20 The average American household will have spent a staggering $4,155 on gasoline by the end of 2011.

#21 If inflation was measured the exact same way that it was measured back in 1980, the rate of inflation in the United States would be well over 10 percent.

#22 If the number of Americans considered to be “looking for work” was the same today as it was back in 2007, the “official” unemployment rate put out by the U.S. government would be up to 11 percent.

#23 According to the Student Loan Debt Clock, total student loan debt in the United States will surpass the 1 trillion dollar mark at some point in 2012. Most of that debt is owed by members of the middle class.

#24 Incredibly, more than one out of every seven Americans is on food stamps and one out of every four American children is on food stamps at this point.

#25 Since Barack Obama took office, the number of Americans on food stamps has increased by 14.3 million.

#26 In 2010, 42 percent of all single mothers in the United States were on food stamps.

#27 In 1970, 65 percent of all Americans lived in “middle class neighborhoods”. By 2007, only 44 percent of all Americans lived in “middle class neighborhoods”.

#28 According to a recent report produced by Pew Charitable Trusts, approximately one out of every three Americans that grew up in a middle class household has slipped down the income ladder.

#29 In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

#30 The poorest 50 percent of all Americans now collectively own just 2.5% of all the wealth in the United States.

Sadly, this article could have been much, much longer. There are so many other statistics about the middle class that could have been included.

For even more insane economic numbers that show just how dramatically the U.S. economy is declining, just check out this article: “50 Economic Numbers From 2011 That Are Almost Too Crazy To Believe“.

What is even more frightening is that this is about as good as things are going to get.

We have already had “the economic recovery”, such as it was.

Now we are heading for another major financial crisis. Just like back in 2008, the entire world is going to feel the pain.

But we never recovered from the last financial crisis. We are like a boxer that is not ready to handle another blow.

And who is going to get hurt the most? It will be those at the bottom of the food chain of course. Tens of millions of Americans that are living in poverty will experience a massive amount of pain, and millions more Americans will fall out of the middle class and will join them.

If you have a good job, do your best to hang on to it. If you don’t have a job, do your best to get one while you still can. Jobs will become very precious in the years ahead.

But also try to do what you can to become less dependent on the system. Almost anyone can find ways to make some extra money on the side. Yes, it will likely cut into your television time. If someday you were to lose your job you don’t want to be left with zero income.

Right now, the U.S. economy is slowly dying and as time goes by the number of middle class Americans it will be able to support will continue to decrease.

Yes, it is like a perverse game of musical chairs, but this is where we are at.

I encourage all of you to think about how you plan to make it through the collapse that is ahead.

Sticking our heads in the sand and pretending that everything is going to be okay is not going to help anyone.

But if we all start planning for the storm that is ahead, and if we get others around us to wake up as well, that is going to do a great deal of good in the long run.

Credit Card Debt In The United States Is Approaching A Trillion Dollars

30 Statistics That Show That The Middle Class Is Dying Right In Front Of Our Eyes As We Enter 2012