Why are Americans in such high debt? Can't they buy what they can afford?

Question

I am 25, married and middle class. My wife and I only buy what we can afford.

We have no debt at all other than our house and one of our cars, and both of the loans will be paid off in 1 year.

A friend of mine bought a huge house, has a house loan and two equity lines of credit, two car payments and tons of credit card debt.

He has a middle class salary and is afraid he will never be out of debt.

Everyone I know has SUVs, big houses, and vacations that they can’t afford and can’t pay off.

Why do Americans have so many high purchases when they can’t afford them?

What happened to buying what you could afford, or a smaller house or car?

Why is everyone in competition with having the most stuff?

No one has EVER given me any money. Everything I have bought has been from mine and my wife's hard work. I don't have a rich family, and I have never taken money from anyone. Thanks

Answer 1

I don't know anyone with any debts.. they mostly all have big family houses,(well perhaps not to big american standards I guess?) holidays and a generally good life... I am not in America so I guess it doesn't count, but you did ask "What happened to buying what you could afford, or a smaller house or car?"
well, nothing happened as far as I see. It' a matter of being organized well and working hard through generations, they all start with something, nobody has any rent to pay and all get to study, then get good jobs, and build a home after a few years, half the money they have saved up, half gets loaned by daddy..
My brother has been saving up some $35k a year ever since he's got his job and that was in the late nineties, he is buying for cash in a few years. He's never paid rent as our family house was split it into 4 apartments, there is even little reason to even buy a home but he wants a second place by the seaside so he can save on holiday money and rent it out the rest of the time.
I don't think anybody here is doing anything extraordinary, it's just common sense.

Answer 2

The problem lies in that they do have means to do it, like credit.... I mean, why not borrow as much as you can and make the lowest possible payment or get another loan to pay your first off, i mean its fun you live outside your pay grade... i agree with you all the way, however. but it is shoved down our throats, i get 10-30 credit card apps and offers a week in my mailbox. I can get a frig from sears for 10 bucks a month, i can get a car for 300 bucks a month, a cell phone for only 25 bucks, service for 50, and the list goes on.... if you dont have enough money at the end of the month, refinance, or go bankrupt.... there is always a way out.... besides the national debt is bigger than us, so look to our example, good ol USA.....its all about freedom......

Answer 3

It's the new American way. Why want for anything when you can have it all with the swipe of a card? It can seriously become an addiction for some people. Everyone is trying to outshine each other by having the fastest boat or the biggest house. People have become accustomed to more extravagant accoutrements. I try to live within my means as much as possible, but not everyone feels that they should be any less than the folks that make $500,000 a year and will do just about anything to get what they want. The average American has 12 credit cards. I'm not average - I have one. For emergencies and big purchases that I want purchase protection on.

Answer 4

This world is based on the view of things you can touch. The majority of people only understand what the can see. I buy what i can only afford as well. I see what you mean my friend. It is sad that people are setting themselves up to fail. Now some parents forgot love and thought that if they just give there teenage son a mustang gt: he might make good choices and be responsible. Well they can't even afford the cars and house they have. This vicious cycle seems to become a snowball effect and can never stop. No one wants to give. Morals and values my friend are forgotten. And what is self discipline? This also has to do with self esteem and high egos. Good things come to thoes who WAIT. have a good one. And i have to take out loans and what not. but I simply balance it out to where nothing overlaps.

Answer 5

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From an Economist’s point of view, loaning money is a healthy and efficient way of managing wealth in the sense that you even out the ideally upward trend in income. That is, you borrow money to fill up the gap you lack when young and pay things back and spend less than what you earn later on. There are many flaws in this simple theory when applied in practice.

Many people get carried away in this mentality of living beyond their means buy continuing to go well about what is realistically possible to pay back even with the predicted increases in income.

Plus, there is tremendous pressure from media, entertainment and the general culture around us to desire and become dependant of many items and concepts which used to be considered as unnecessary luxuries. This is not a uniquely American problem though it looks as if it originated from there. Despite the uncertain nature of the economics, natural resources and political changes in the world today, there seems to be a great deal of competition and need to out do each other in all things material.

Plus there has been a dramatic shift in spending habits on entities that not many people realize become obsolete in a much shorter time period than their previous counterparts. For example, people used to buy a telephone to be used as a telephone and the only reason for someone to replace one was if it was no longer performing it’s job, yet today we spend ridiculous amounts of money on trendy mobile phones (which of course do much more than just making calls – yet we only use it for making calls anyway) and as if that wasn’t good enough, you realize in just 8 months your model is already out dated and you want to buy another one just to keep up with the trend.

In today’s twisted financial schemes and sometimes down right scams, most people are fooled into believing they can actually afford what they really can’t. And the price they pay not to realize it is sometimes much bigger than the small extra mile they run enjoying it’s narrow benefits.


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Answer 6

Because society has conditioned everyone to buy what they can't afford but it's cleverly disguised as credit.

Look at all the commercials. You’re not a real man if you don’t buy that hummer. Or you’re not a real father if you don’t buy that 6 bedroom house for your family of 3.

We live in a capitalistic country that depends on consumers. And businesses are successful by tricking people into buying what they want rather than what they need with money they don’t have.

Answer 7

Sometimes its not competition that gets people into financial problems
I live here in Michigan, we are a huge Union trade manufacturing State
Companies are choosing to leave Michigan and make the same thing in Mexico for cheaper labor
there are few jobs here.. causing people to spend less , causing other smaller stores or companies to close due to dismal sales

what bothered me the most is your pointing at Americans
why didnt you say ,,why do people

Answer 8

Well, it must be nice to have been born with a silver spoon in your mouth, to be able to pay off a house in a year.

But you see, in the real world, some of us don't have huge trust funds, or mommies and daddies that gave us huge sums of cash to make down payments on things, so if we want a house, we have to go for the 20 or 30 year mortgages. If we want a car, we have to have the 5-year loan.

Try living in the real world for a little while, and stop looking down your nose at everyone else.

Answer 9

Here's the thing, Americans are not educated in finances.

We're sold on the image of job = wealth, and taught the nuances of instant-gratification shopping.

But I think most folks are starting to understand the old motto of "charge it, it's free" simply doesn't work anymore.

Why do you think companies like Wal-Mart have succeeded so well? They cater to the 90% of America that's broke. You go there for one thing, you leave with 20.

Instant-gratification microwave societies.....it only leads to economic depression and personal disconnection.

Answer 10

Because here in the good ol' US of A we are told we need to have huge SUV'S and buy big houses and are entitled to the best of everything. In many other countries they eat much smaller portions of food and take much better care of their health. That's why you see so many ungrateful, unhappy and unfulfilled people here whereas many poor people in other countries cherish what little they do have and find joy in the simple aspects of life.