Family Finance

By Genevieve Wilson

What happens when the money runs out?

debt

$60,000,000,000,000.00! Can you believe that the national public debt of 49 countries (with publicly accessible data) is 60 trillion dollars? All you have to do is check out NationalDebtClocks.org and see that every minute 4.5 million dollars of interest is added to the amount owed by these nations.

The federal, state and local governments of Australia owe over $700 billion, according to www.AustralianDebtClock.com.au. However, overspending in Australia is not just a government issue, it is a personal issue as well.

ABS 2013 stats reveal household debt was $1.84 trillion; around $79,000 per person. Over the past 25 years, household debt has increased nearly twice as fast as the value of household assets. Australians are amongst the world's greatest borrowers. Debt is crippling our nation but we do not seem to care.

Why are we in debt?

We are living outside of our means. For many, the temptation is to try to live the life of the bigger house, the newer car, the newer TV, more clothes, books, videos and holidays.

Basically, we end up having to borrow to live the lifestyle we think we deserve, which gets us into all sorts of trouble.

Our nation is doing the same. Politicians try to buy our votes and/or stimulate our economy with building projects, pensions, education, social programs, better health care, etc. The truth is that we cannot afford them and we are borrowing money and accumulating a huge debt that is going to be passed on to our children.

Then for our country to pay back the interest and loans it needs to borrow more money to keep up the same standard of living. It is a vicious circle that can lead to crippling debt.

Why is debt bad

The Bible is very clear about debt and what it can do to us. Debt makes "the borrower [become] the slave of the lender" (Proverbs chapter 22, verse 7). Borrowing money gets you into a cycle of owing people and then having to pay interest back so you have to borrow more to make those payments or buy the stuff you need. There is also risk associated with staggering levels of debt. If we are unable able to pay the lender back, they may force renegotiated terms or foreclose the loan. We need to take a good look at what is happening in Greece and realise that they are an example of what is going to come to many nations when our lenders say enough is enough.

Greece is now being forced to put higher taxes on its people, has an unemployment rate of 25% and the people are only allowed to take out $60 a day from the banks.

Can you imagine having your life savings being frozen by banks so they can repay the nation's debt?

How do we fix it?

We need to remember that debt does not create jobs, it causes us to pay millions and billions of dollars to financial institutions in interest repayments. If that money was not spent on interest but went back into paying for our goods and services we would be actually able to afford more and would be better off financially.

Well there are two ways we are going to fix our problem of debt :

First, we need to simplify our lifestyles and make hard decisions to tighten our budget but realise that it is for a season (yes, with the amount of personal debt and federal debt that season could be many years). It is our debt and our problem, not something to pass off to the next generation.

And the second option is that we are told "sorry no more money for you" which is happening around the world right now. Look at Greece, Puerto Rico and Argentina. Financial agencies will tell us what to cut and what to tax and we will not have the option. Not only will the economy dive and unemployment increase, there will be less money to pay our interest back. This means even more cuts, higher taxes (because borrowing causes a vicious cycle). Rioting in the streets and food shortages may ensue. Those we borrowed money from will want it back, and they will do what they can to get it.

We need to exhibit some self-control and cut our spending and budget and bring it back into the black.

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