American families struggling with debt and emergency savings

[Insurance Forums Staff]

Insurance Forums Staff submitted a new article

American families struggling with debt and emergency savings

More than four in five define the American Dream as financial security for themselves and their family, and more than half think this is unattainable, according to MassMutual’s new State of the American Family study.

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[goillini52]

We should not take debt at any cost. What is the need of debt?[/QUOTE]

So that you can buy something that you can't afford.

 

[Markthebroker]

So that you can buy something that you can't afford.

Well, more specifically so you can not only buy something you can't afford, but pay more for it. For example, instead of buying a car cash like I would, you instead buy it for, say, $30,000. You finance it because you "can't afford" to pay cash. Let's say 2% interest over 5 years, you have now paid an extra $3,000. You can't afford $30,000 but somehow you can afford $33,000.

I, on the other hand, would (and and always do) buy that car, lets say, 5 years old used, and use "cash in hand" to hardball down the price. Now I have it for $17,000, and spend an extra $200 to have the mechanic look over it and make sure it is good. So, I have bought pretty much the same car for $17,200 that you bought for $33,000 (plus tax). Somehow you can't afford $17,200, but you can afford $33,000? That's the logic of many people in debt. Or they don't set aside a cash cushion, then something happens, and they take on debt. Health issues, lost job, car broke down, whatever.