Falling into debt is easier than falling into a hole. And, more fun! Like Wayne and Garth skipping merrily along, the United States has waltzed its way into a bit of a jam– one that you can learn a lesson from.
Let’s talk numbers for a moment, shall we? The following figures show the US’ GDP (gross domestic product, or annual income) and its public debt (owed to other countries, private companies, etc):
- GDP $14.59 Trillion USD
- Public debt $13.258 Trillion USD
As of July 28, 2010, the “Total Public Debt Outstanding” was approximately 93% of annual GDP. It doesn’t take an economist to understand that this isn’t a good thing. Compare this ratio to your own household income. If you earn:
- $50,000 p.a. then your debt would be $46,500.
- $85,000 p.a. then your debt would be $79,050.
Would you be comfortable with that? As of February 2008, the US’ public debt equated to $60,100 per member of the working population.
Debt on an investment, like a home mortgage, is one thing. The US’ debt here is not necessarily on an asset that will increase in value. It will take a major change of course to correct this debt trend. Some estimates even indicate that the same kind of spending will see the US public debt at 99.8% of GDP by 2014. America will then have complete and total freedom with exactly 0.2% of its income.
Sometimes, numbers tell a story. In terms of money, the person earning it can often determine how the story will end. The US may lose the freedom that makes it unique if better decisions are not made. As for you? If you can manage to keep a closer eye on your spending than the US does, you can write your own story. Aim for your debt to be 0% of your GDP, and guess what you’ll have? 100% freedom.