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impatimce
to have all the goodies of
life"
(Sense With Dollars,
Doubleday
and Company, 1968, p. 1).
Credit buying, and particularly the
use of a credit card, creates an illusion
of prosperity. The small size of the
individual installment, its delayed ar–
rival at the end of the month, and
the lack of cash at the time of pur–
chase
SEEM
to make the "goodies of
life" suddenly within reach.
As one young serviceman com–
mented, "Sometimes when you save
and wait too long, the good things
you want to get might pass you by."
Yet it is just this kind of reasoning
that has caused millions of families
with otherwise adequate incomes to
spend a paycheck before tbey even
receive it.
Credit can have
its
place in any
fami ly, if that family knows how to
use it properly.
A Guide to Credit
The average money manager first
needs to realize that expenses are of
two types. Rex Wilder, in the
Mac–
Míllan G1tide to Family Finances,
identifies them as wants and needs.
A
need
he defines as "a desire of
great urgency, very often a biological
necessity" ( such as food and shelter).
A
want
he views as "a desire of little
urgency, set in motion by no basic
necessity." Credit can
be
cautiously
applied to needs, but should rarely
be used for wants.
Most families in trouble have used
too much credit on wants rather than
on wbat they really needed. Until
they accumulate savings, they should
adopt a policy of buying
wants
strictly
on a cash basis. Here's why:
First of all, if you save up and
pay cash for the lu..xuries of life rather
than buying them on credit, you w!ll
immediately save on heavy interest
charges. Most of the large department
store cbains make more profit on
credit than they do on the actual sale
of goods.
Saving cash for luxuries exerts a
remarkably stabilizing influence on
your family's monetary policy. By the
time you have saved the needed cash,
there will be Jittle doubt in your
miad whether you can afford the ítem
or if in fact you still realJy want it.
Yes, I certainly understand that
Modern Money Paradox
I
N THE UNITED STATES alone, con–
sumer debt exceeds one hundred
thousand million dollar:s. That is
about $500 for every man, woman
and child. The picture isn't much dif–
ferent for other prosperous nations
of the world either.
Mortgage debt is three times great–
er than the consumer debt. One re–
cent estímate showed that, if every
person owed an equal amount on all
consumer and mortgage debt in the
U. S. , the average family of four
would have a total debt approaching
$11,000.
In this light, the trend in personal
bankruptcies is not surprising. In
1950, personal bankruptcies averaged
27 on a scale of 100,000. By 1960 it
had jumped to 87, an increase of
over three times. But by 1970 it had
again escalated to 161.
Compared to twenty years ago, the
average family lives in affiuence, but
we have not all become wealthy. Far
from it. But as a society, the Western
world overfiows with the trappings
of prosperity.
In little more than ten years,
PlAIN TRUTH
June
1972
median income has risen
75% .
There has been a paralJel rise in the
cost of living. But accurate statistics
show that the median paycheck still
packs at least one third more buying
power than it did in 1960.
About 80% of all American fami –
lies have at least one automobile. One
in
three has more than one. Two out
of three families own tbeir own
home. One borne in eleven is
equipped with a swimming pool.
Four out of .five families have at
least a black-and-white television,
and one
in
four owns a color set.
On top of this, Americans spent
more than 80 billion dollars in one
recent year on pleasure alone. That's
the substantial total of $400 for
every single individual in the
country. In Europe, the trend is little
difierent.
Also, approximately 28 million
Americaos own stock in corporations.
So it seems very hard to understand
why so many people are saying that
the "good life" that money ought to
be bringing is eluding them.
Personal
Debt
In the
Billions of
Oollars
United States
$555
Billion
In Personal Debt
as of
January 1, 1970
223
196
1$6
130
93
56
{
380
312
263
555
521
/
1945 46 48
50 52
54
56
58 60 62 64 66 611
69
Source:
U.S.
Oept. of Commerce
15