Debt Load

There was an interesting article in this week's edition of Time Magazine about what our economic recovery will look like. One of the sections in particular caught my attention.


[Frugality] is an extremely fashionable topic at the moment. Some cultural observers even think Americans are due for a prolonged shift away from the consumption obsession of the post-World War II era. That strikes me as an iffy bet, but it is clear that the debt-fueled consumer spending binge of the past couple of decades is over. The household debt-to-income percentage more than doubled, from 65%in 1982 to 135% in 2007. That turned out to be way too much for us to handle, and now the leveraging process has gone into reverse. The latest household debt-load reading from the Federal Reserve is 128%, and while nobody knows exactly where the percentage will end up, a lot lower seems like a safe prediction. Which means that for years to come, American households will be spending less than they take in.

Huh, over 100% debt-to-income was too much to handle, does this seriously surprise anyone? I’m definitely not the first person to ever say “live within your means.” How do you prepare for retirement if you’re not only not saving, but spending more money than you’re making? I hope that the cultural observers are right in that we all move away from all that consumption and start trying to build on our wealth by saving some of the money that we earn, and that we’re all in it for the long-term.

Money Isn't The Only Thing You Have To Budget

It's imperative to budget your money if you want to properly manage it, and it's equally important to budget your time if you want to have enough. Most of us have very busy schedules. If you work full-time, have a house to maintain, kids to raise and spend time with, a significant other who you'd like to be more than just a roommate, and exercise to remain healthy to do all of that; it can be hard to fit everything in.

My husband and I got a rare date night tonight, and while we were walking together, we talked about things we'd like to do with our time (like post on this blog on a more regular basis), and how hard it is to find the time for everything. But then we starting talking about how if we actually sat down and looked at how we were spending our time every day, we might be surprised at how we could fit in a few more of the important things. I started thinking about how our time is much like our money, most of us don't have enough for everything we need or want, and we have to decide when and how we're going to use it, and prioritize and make sacrifices when necessary. Wouldn't it be great if we all won the lottery and had clocks that could stop time? Since that's not reality, I guess the Money Maiden will have to be as diligent with her time as she is with her money.

Another Benefit of Delayed Gratification

Practicing delayed gratification is one of the most important tools to assist you with successful money management. By saving up in advance so that you have the money for the things you need before you purchase them, you keep yourself out of bad (unnecessary and providing no long-term gain) debt. The other thing that delayed gratification does for you is to allow you time to cool off. I’ve found that there are times that I’ve decided I really want something, but by the time I’ve saved up for it I realize that I’ve gotten along this far without it and don’t really need it.

So now not only did I avoid going into debt, but I’ve also managed to increase my savings rate. Two for the price of one, always good in money management!