Is it normal to be in debt?

amother

Honeysuckle

Wed, Mar 08 2023, 10:14 am

LovesHashem wrote:

I grew up seeing my family struggle financially and I knew then I'd never go into debt.

If we don't have the money we don't buy it. We use debit cards only. We only use a credit card when we order online or buy an appliance or something sometimes and pay it over a few months.

That might be a simplistic approach. Often people don't avoid debt with this attitude. Families must pay rent, food, utilities, tuition, car, certain home repairs, and medical expenses.

Often times debt is accumulated by not being able to afford necessities.

BrachaVHatzlocha

Wed, Mar 08 2023, 10:35 am

There is good debt and bad debt. I am assuming yours isn't "good," ie mortgage or from education. I don't know what's common. After making a simcha, maybe more common. I recently got at work about a gmach that helps consolidate debt/or something to avoid interest and someone seemed surprised when I insinuated I don't have debt. I was surprised by their surprise !!

amother

Babyblue

Wed, Mar 08 2023, 10:36 am

DVOM wrote:

We have no credit card debt, but we do have student loans and a mortgage. That's debt, no?

Student debt and mortgage debt are considered to be good debt because theoretically the money borrowed builds a better economic future. Of course you can still be an idiot by buying a house you can’t really afford or getting an expensive degree when you could have achieved the same result less expensively. For example, you can save money by doing two years of inexpensive community college and then finish at a university for final years.

For many people mortgage interest rates are a tax deduction along with property taxes. And student debt and mortgage debt generally have lower interest rates.

Credit card debt is always bad because it indicates thst you are spending more than you can afford. It is also horrendous expensive since cards carry high interest rates so over the course of years you are paying a huge amount in interest. Sometimes this would be more than the original debt.

LovesHashem

Wed, Mar 08 2023, 10:53 am

amother Honeysuckle wrote:

Lower you standard of living or move where things are cheaper.

Plenty of people in Israel don't eat chicken during the week because they can't afford it.

Some people can't avoid debt but many people are buying things that aren't nessesities

amother

Blushpink

Wed, Mar 08 2023, 11:07 am

LovesHashem wrote:

There are people in America don't eat chicken during the week, either.

amother

Arcticblue

Wed, Mar 08 2023, 11:53 am

Obviously it's not a good thing, but sometimes it can't be helped. Has nobody here heard of medical debt? Most Americans, even with insurance, are one bad accident or illness away from ending up in debt. What then? Very hard to increase-income or cut-expenses your way out of that.

amother

Babyblue

Wed, Mar 08 2023, 11:57 am

amother Arcticblue wrote:

Yes bad things can happen to people and they accrue debt.

However, I do think that the majority of the credit card debt on imamother is not from one terrible calamity but because income is not enough for their day to day expenses.

If that is the reason for credit card debt, you need a plan to get out of the trap - increase income; decrease spending.

If it is one calamity you can figure out a way to pay it down. If it is because your income doesn't cover your living expenses, all that will happen is that you will go further into expensive credit card debt.

amother

Snow

Wed, Mar 08 2023, 12:06 pm

amother Arcticblue wrote:

OP here specifically said credit card debt. The advice here would be completely different if she asked if she was normal have 25k in medical debt.

But still at the end of the day while there’s many ways to end up in debt, the only way out of debt without 3rd party involvement is to increase income or cut expenses. And anything with interest should be paid as aggressively as you can before it buries you.

amother

Stonewash

Wed, Mar 08 2023, 12:39 pm

There's different ways to accumulate credit card debt. One way is to overspend what you earn, which isn't great for financial stability. But a large expense, such as medical bills, a new car or other large purchase and you don't have the savings to cover, is different. It also makes a difference if you're making enough each month to be paying off the debt.

amother

Babyblue

Wed, Mar 08 2023, 12:41 pm

amother Stonewash wrote:

Why would you charge a new car at 24% interest. Because a car loan is collateralized by the car you can get a car loan for a much lower interest rate.

amother

Dodgerblue

Wed, Mar 08 2023, 1:03 pm

A quick google search turned this up…(keep in mind these are not Jewish families who have to pay private tuition, pay for kosher food and believe in the Mitzva of bringing children into the world.
Cut yourself some slack and congratulate yourself on your hard work paying it off.)

Copied and pasted from cnet.com

How much does the average American have in credit card debt?
$5,589
Carrying thousands in credit card debt has become normal for many Americans. The average credit card balance is $5,589, according to a 2022 Experian report. Last year, total credit card debt in the US rose by $38 billion from Q2 to Q3, according to the Federal Reserve Bank of New York.Feb 3, 2023