A recent study showed that 80% of Americans are caught up in the chains of debt. That’s 8 in 10 people! How did we get into this situation?
America’s financial institution is one of the most sophisticated in the world. Several loan programs like mortgages, auto loans, and credit cards allow you to spend your future earnings today to achieve specific goals. When used wisely, this tool can be a lifesaver. However, it’s way easier to misuse lots of these mechanisms. Consequently, many people are hooked on debts they’ll spend several decades repaying. The debt crisis is killing the American dream, and this article explores why this is the case.
What is the American Dream?
We all know about the foundation of the American dream, which is rooted in the Declaration of Independence:
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness”.
The American Dream is the ideal by which equality of opportunity is available to all Americans, allowing the highest goals and aspirations to be achieved. For several generations, both citizens and countless immigrants, through hard work and sacrifice, have attained tremendous success. The free-enterprise system practiced in America makes it possible for individuals to achieve whatever they want – only limited their imagination and capabilities.
The American Dream means different things to different people. For some, it is the prospect of starting a family and giving their children a better life. For others, it is the ability to accumulate wealth. However, debt is killing the financial freedom (which is a core of the American Dream) of many.
Do You Need to Get into Debt to Achieve the American Dream?
Can you imagine living debt-free: you have no mortgage or auto loan to pay, neither do you have any need for a credit card? If you’re like most people, you probably can’t. If you want to purchase a house, you think about a 20- or 30-year mortgage. If you want a car, you take out an auto loan. And so on.
However, many people, especially young people, are too eager to live out the lives of their dreams now. Just because you can make monthly payments for a mortgage or brand new car doesn’t mean it’s the right decision. If your idea of the American Dream is having everything you need now, then you cannot achieve it without getting into massive debt.
But this shouldn’t be the case. One of the core principles of the American Dream is sacrifice. This means sacrificing the extravagance of the presence for a more sustained wealth in the future. Making sacrifices means living in a rented apartment till you save enough to make a considerable part of the down payment for a mortgage. It also means purchasing an older car now until you’re financially buoyant enough to get the car of your dreams.
People that genuinely went from rags to riches had to make difficult sacrifices while working extremely hard. Unfortunately, everyone today wants to live their dream lives without putting in the work and patience required.
Here’s the key lesson to remember: Do not think you can use debt to live the American Dream. It will come back to haunt you!
How Student Loan Debt is Killing the American Dream
So far, we’ve explored how poor financial decisions are killing the American Dream of many. But when it comes to getting a college education, you’d think that this path is supposed to help people attain their aspirations. While it is true that the average college graduate earns way more than a high school graduate, the rising cost of a college education over the past few decades have transformed it into a burden.
According to the College Board, the average cost of a four-year college adds up to $87,800 for an in-state student and $199,480 at a private college. That’s why over 54% of college attendees take on debt, including student loans, to pay for their education. According to the Federal Reserve, the U.S student loan amounts to a total of $1.6 trillion as of 2020, of which the average borrower owes about $30,000.
With the average salary for entry-level positions as low as $40,153 per year, graduates are disadvantaged due to the burden of student loan debt. At this point, most people start their independent lives and have many other responsibilities to cater to, including rent, utility bills, food, transportation, and more. Little wonder it takes the average indebted graduate 20 years to pay off their student loans.
Here the bottom line: While getting a college degree will improve your earning potential, doing so with a college loan, might make it more difficult to attain your financial goals.
Debt can impede attaining your American Dream. That’s why it’s important to set your financial life in order, make the necessary sacrifices, and avoid wasteful spending.
Contact us today for help.