Easy Credit and Low Interest Rates - What Next?

The state of our economy is robust, dynamic, strong and resilient. These are the terms I’ve heard lately used to describe the American economy, a system we all depend on and participate in. But there also seems to be an underlying discomfort, a deepening unease about the future. Big changes have already taken place and more are on the way. How we as individuals adapt to these changes will determine our future well being or lack of it.

Like many Americans, I’m in the boomer generation. My father’s generation was educated in part by the great depression. They learned the importance of saving; for the most part they learned to live within their means. Credit was hard to get and was considered expensive at the time. Many of the previous generation’s workers enjoyed retirement pension plans, and could count on social security as a safety net to supplement retirement income.

In contrast today credit is easily available and free for six months. How many credit card offers do you get in the mail every week? Even scarier how many do your kids get? While it’s nice to have the lowest interest rates in recent history, the situation has created a generation of spenders not savers. Today we enjoy big houses, big SUV’s and a big mountain of debt. Many in today’s work force have seen reductions in, or a complete loss of the old type “pension plans”. We have been encouraged to save for ourselves through company sponsored retirement plans like 401-K plans. We also have available Individual retirement accounts (IRA’s). But it’s up to us to understand and use these plans properly. The burden of retirement has shifted from companies and institutions to you! You are responsible your retirement – the safety net has been spent, the pension plan of fifty years ago fell victim to global competitiveness.

In general, most Americans are doing a poor job of dealing with the changes we are facing. Rather than learning to save, we have learned how to pay off one credit card with another. We have learned how to use cheap credit to buy more house, more car, more stuff than any other generation in history. As a result, the boomer generation has more household debt, more personal bankruptcy, and is less prepared for retirement than any previous generation in history. No wonder we’re uneasy about the future. Many of us are just not prepared.

Here are a few things that we do know. 1) Congress has spent your social security money. If you’re under 55 Social Security will be cut from current levels. I would guess that the younger you are the bigger the cut. 2) With a rising federal budget deficit, taxes have to rise at some point or new taxes could be imposed. 3) Interest rates on consumer credit and home loans will come under pressure, meaning at some point interest rates will rise.

How will you handle higher taxes, higher interest rates, and a lower monthly SS check in retirement? One thing becomes very apparent, planning for your financial future has never been more important. With all the problems we face, we also have more opportunities than any other generation. Use them well, your future depends on the decisions you make