Posted on August 02 2012
According to the G.19 Consumer Credit report released by the Federal Reserve, revolving debt (mainly comprised of credit card debt) increased by 11.2% in the month of May.? This was the largest increase in the last five years.? The reasons for this increase could be a combination of many things.? We could attribute this to the idea that the economy may very well be on its way back, and more and more Americans have the confidence to start using credit cards more and more.? Weddings, graduations, and summer vacations may have had an impact on the rise as well.
This report may be a sign that the economy could be on its way back, but it does make me nervous at the same time.? The first question that came to my mind when I saw this was, ?Didn?t we learn our lesson yet??? The statistics that have been pouring in over the last couple of years have shown more Americans saving their money, paying off debt, and living within their means.? Then, at the first sign of comfort, spending shot back up faster than it has in years.
My wife and I just finished the process of putting all of our finances toward paying off our student loans ? a process that took over three years, despite our aggressiveness.? Now that we are a month removed from that relief, I am finding it easy to have a mindset of ?Oh, we can afford this now.?? Since we haven?t necessarily set that next financial goal, I can see our spending habits already starting to change into a higher level of comfort.? Trips to the mall, extra items at the grocery store, and other expenses that we would have never considered in the three years prior, suddenly have become normal life again.? Apparently, we didn?t completely learn our lesson yet.
My challenge to you ? and myself ? is to avoid falling into the mindset that the economy is coming back to normal, and that your financial goals don?t need to be as tight as they have been these last few years.? That attitude is often what leads to the increase in credit card debt.? If you haven?t done so already, make some very precise financial goals for yourself, create a debt-repayment plan and a savings plan for yourself, stick to those plans, and become more conscientious of every dollar that goes out from your bank account every month.? Rather than spending your free time finding ways to spend money, start using some of that time thinking of ways you can make extra money to achieve your financial goals.? It?s never too soon to start saving for retirement, your next vehicle, or that emergency fund that seems like it will never become a reality.? Whatever you do, if you were at the point where you weren?t using credit cards anymore, don?t become part of the 11.2%.
By Nathan Aakre, CPFC
Certified Credit Counselor
?Consumer Credit ? G.19.?? Board of Governors of the Federal Reserve System.? Board of Governors of the Federal Reserve System, 9 Jul. 2012.? Web.? 17 Jul. 2012.
Source: http://www.familylifecredit.org/credit-card-debt-rise/
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