Investing in stocks and in index funds is great, but the best investment you can make is paying off your debts. Did you know that a typical credit card purchase ends up costing 112 percent more than if cash were used. Thats amazing, here is 5 reasons why people are in debt:

  1. People are convienced that they can afford more than what they actually can. This is sad but true.They feel that they have to have that car and most people live in houses that they cant afford. Some 40 percent of American families annually spend more than they earn.
  2. We have accepted that debt is a acceptable way to live. People think that as long as its manageable, everyone is able to live up to the american standards.
  3. Not saving up for emergencies. This is a huge one. No one can tell you when emergencies are gonna happen or when theyre not going to happen. So, people figure nothing serious is gonna happen to them and before you know it, their car engine dies or they get a call from the hospital. Situations like these are perfect times to put your worries behind that credit card. FYI, The personal savings rate in the United States has dropped from 8 percent in the 1980s to just under 2 percent since 2000.
  4. People are impatient and dont know how to manage their money. Almost everyone agrees that having a credit card can be a life saver, 9 of 10 Americans claim credit card debt has never been a source of worry. That is not to say its because there is nothing to worry about. I think that people have very little training in money management and it pains them to think about their responsiblities when paying back your debt. Most people dont know how to control their spending and cant wait for their next paycheck so they put it on their credit cards.
  5. Creditors convince you to live outside your means. Studies show the average consumer is exposed to more than 3,000 marketing messages every day. In the last decade, it’s been estimated, solicitations jumped from 1.52 billion annually to 4.29 billion. Before WWII, we werent bombarded with advertising masages like we are today and back then they used cash, they didnt spend what they didnt have. Now, we have thousands of people trying to tell us things that we need and why we need it and trying to concience us how we cant live without them.

Now heres some interesting facts about debts in our country.

  • Some 1.6 million U.S. households and one of every 73 filed for bankruptcy in 2003.
  • There are roughly 1.2 billion credit cards in use in the United States.
  • Average per household debt in the U.S., not including mortgage debt, is about $14,500.
  • Average card debt among people who have at least one card is $9,205 — triple what it was in 1990.
  • Last year the credit card industry took in $43 billion in card fees.

And my favorite…

  • The average graduate student has six credit cards and one in seven owes more than $15,000.

Woot! I currently have 3 credit cards and owe about 5,000. By the time I graduate, I should be debt free and even have my own investment portfolio.