A Nation in Debt: Why You’re Stuck in Credit Card Debt and Can’t Get Out

We are a nation in debt. According to Nerd Wallet, in 2019 the total debt owed by all US households was $13.95 trillion. (Are you serious? I can’t even make sense of that number!)

If that number isn’t staggering enough, consider this: our country has a debt of over $22 trillion and it keeps climbing. When America’s debt was $16 trillion (which is what the total US consumer debt is closing in on fast), that was an increase of $35 million an hour and about $2 billion every day (Yahoo! Finance)!

As the Yahoo! Finance blog explained, in the previous year world-famous actor Tom Cruise earned a reported $75 million. That’s about 44 times as much as the average American worker will earn in his or her lifetime (earning an average of $42,000 per year for 40 years).

For Tom Cruise to pay off just $1 trillion in debt, he would have to earn $75 million a year for 14,000 years! To pay off all current US consumer debt, the poor actor would have to work 196,000 years, earning that same $75 million a year.

It would take the average individual 8,624,000 working lifetimes to pay that off.

In short, the numbers are staggering, but are they really that surprising? Almost no one receives any type of genuine financial education in high school or college. Even students who are pursuing some type of financial degree have limited education coming in with regard to interest, debt, savings, investments, and all of those other factors we should all have received in high school, at the least.

Most Americans don’t even know how to balance a checkbook. We barely use checks or cash anymore. We have morphed into a swipe and go society, having no clue the lingering impact even a seemingly innocuous purchase can have in our lives.

It’s sad. It’s also a clear reflection on the fact that 78% of full-time working Americans are living paycheck to paycheck (Forbes).

Don’t miss the forest for the trees.

This is a simple adage that basically means don’t miss the big thing because you’re caught up focusing on the little things. If you focus on looking for the forest and can’t see it because you’re too close, you’ll miss it. You see the trees, but simply can’t see the forest because you’re too close to all of it.

When we focus on looking for the root cause of the financial crisis our country faces, we don’t see it. We see the trees. We see the numbers. We see the debt.

But what’s the cause?

A failure at every level of our educational system and our financial industry. I discussed the failure of our educational system in another blog. You can read it here.

Has our financial industry failed us?

Not necessarily, but could it do better? Sure. But a person going to the doctor because of health issues isn’t going to get healthy just listening to his or her advice, right? No, they have to do what their doctor advises.

You don’t lose weight sitting around not exercising and eating junk food all day. So, all the advice financial experts are giving isn’t making an impact. Why?

Think about it. The numbers of people living paycheck to paycheck have gone up, not down. There are more financial advisors, programs, information online, books, podcasts, YouTube videos and so-called “universities” all offering sound advice on how  to avoid, manage and eliminate debt and ultimately be debt-free, but the situation is getting worse.

It’s not just getting a little worse… it’s getting a lot worse.

In 2015 the percentage of workers living paycheck to paycheck in the United States was 75%. In 2018 it jumped to 78%. What is it going to be this year in 2020? 80%?

And what point do we say enough is enough?

At what point do we turn the magnifying glass inward? At what point do we finally look at the reflection in the mirror and accept responsibility for ourselves?

Financial advisors and counselors are not malicious. They’re not out there simply trying to make a buck and not actually help their clients.

In fact, the opposite is true in my experience. I’ve spent a considerable amount of my 25 years in the financial industry training other financial advisors and I have a very good sense of the quality, character and motivation of these individuals. I will say unequivocally, most financial advisors are genuine, caring individuals who want to make a difference in their clients’ lives.

It’s just that the formula they have followed for decades doesn’t work. It hasn’t worked and it won’t work.

What is this “formula?”

Basically, it comes down to putting bandages on wounds.

Maybe you’ve heard about the debt snowball payment plan. This has been a popular and somewhat effective way for some households to pay down and pay off their debts.

It may go against conventional thinking, but there are some positive aspects to it. In short, if you were to follow the debt snowball payment schedule, you would start by paying the minimums on all your debts.

Whatever money you had left over at the end of the month that could be put toward debt payment, it would go to the smallest debt, or the lowest balance. Some people believe it’s better to pay off the highest interest first, but this debt snowball payment plan tackles the lowest balance first.

Then, once that balance is completely paid off, the minimum payment that had been going toward that debt is added to the total monthly debt payment amount and then applied to the next lowest balance.

It snowballs to the point where you’re putting a lot more money each month toward paying down the highest balance.

Then what?

This is the part when most people stop reading. Not this blog, mind you, but the story in general.

People celebrate with a big roar, cheer, and celebration. They do a little dance and feel great.

They deserve to feel great. They have just paid down all of their debts! Wouldn’t that be something you would want to celebrate, too?

They might call into a radio program where a financial advisor hosts a daily broadcast and get a big ‘attaboy’ or ‘attagirl’. These people who applied themselves and rid themselves of this debt burden, earned and deserved those accolades. 

But, what happens next?

This is where the failure begins.

Financial advisors focus more on helping people plan for retirement, implement appropriate investment strategies, ensure they have the appropriate insurance coverage and make sure the estate plan is in order. While the focus is almost exclusively on the asset side of the ledger, the liabilities are discussed but quickly forgotten.

When advisors are faced with people mired in debt, most will offer strategies, tactics, and advice, but typically that’s where the guidance begins and ends. 

Sometimes clients take this advice to heart and eventually get themselves out of debt. Most of the time they don’t.

What I want to focus on in this next few moments is what happens to the people who successfully get out of debt following one of these formulas.

We don’t hear about those stories after the celebration.

Many of them fall back into the same patterns and get mired in debt within a few years. It’s just like people who win the lottery. So many stories are out there about people who won millions of dollars and went broke soon thereafter.

Hundreds of people who won the lottery wish they never heard about it in the first place.

That’s because, when you find air and feel that you can finally live life again after years of sacrifice and struggle, you take in a big, deep breath and celebrate.

That celebration might be tempered at first, but eventually you start seeing all the things you wanted while paying down your debt but couldn’t afford. The new car, the bigger house, the nicer furniture, the awesome vacation, etc.

Suddenly those same people who now have no debt, empty credit card balances, and wonderful dreams get caught up in the same patterns that got them in trouble in the first place.

It’s all about beliefs.

I come back to this time and time again because it’s true. With broken beliefs revolving around money and finances, without a solid financial education and background, it is inevitable that almost every person who follows these financial plans and programs will wind up in the same pain later on.

I call it Pain Island.

We can put bandages on the wounds, apply ointment and salve and help them heal as best they can, but that’s not helping solve the problem.

We need to understand why people are getting wounded in the first place. Why are they running into the thicket, into the thorns, playing with knives, or playing with fire?

What is causing people to do this over and over and over?

Treating the wound is certainly important, but it won’t solve the problem in the long run.

If we address the broken belief systems that have led our country into nearly $14 trillion in consumer debt and a nation mired in $22 trillion debt and climbing, then we might actually solve something.

If you are struggling with debt, don’t understand how you got in this situation or how to get out of it, if you have struggled to implement a debt payment program and things continually seem to get worse (or no better), it’s time to dig in and discover where your belief system surrounding money began.

It’s there that you will find the answer. And it’s there that we — together — can find the solution that works for you.