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In reply to the discussion: Do Americans Know What a Massive Ripoff American Life Really Is? [View all]Johnny2X2X
(19,213 posts)And have read a ton of investment and personal finance books. The problem is that there's the proverbial hump to get over so that every setback isn't something that dooms you to debt for years.
And it's incredibly hard, no matter how much your income is rising.
Although he's an asshole about a lot, Dave Ramsey has a few good points. The first step is to get $1000 cash into a savings account. That is you emergency fund and will be enough for 95% of small things happening that can force you into debt.
Like I said, I've been there. I was in a situation where I was earning very little and had my car break down and had no hope of fixing it so I could still make it to work. I would say it was a mistake, which it was, but going to a payday loan place allowed me to get my car on the road and maintain a job. That was very important, but that $600 I borrowed was paid back with so much interest that I paid $1500 back.
And "building credit" can also be a pitfall. People get these high fees and high interest rate credit cards to build credit with and next thing you know there's an emergency and instead of using it a little and paying it off every month, you've had to spend $1200 on it and now are stuck with this revolving debt for years.
The problem is once you've entered into a cycle of credit card debt, it's just incredibly hard to avoid the next big charge emergency because you're now paying cards instead of saving.
And all of this doesn't even mention the problem, the problem is that incomes in the US have been stagnant for 40 years. People no longer earn enough to live without going into debt, it's as simple as that. People today don't lack common sense, they don't lack work ethic, they lack fair wages. It's easy to preach common sense once your income allows you to live without going into debt. The reality is that I have the same values and work ethic now as I did 15 years ago when I was one of the working poor. I was able to add some skills that raised my income to a level where I can live without going into debt and where I can now have some real savings. Sure, I'm a little older and wiser, but I also know that my 15 years younger self as a hard worker and doing the best he could at the time.