MB is spot-on as usual. My goal as I approached retirement was to leave the workforce debt free. No mortgage, both vehicles paid off, no credit card debt. Keep cash on hand for a month's expenses always and enough in the retirement account to preserve the principal and live modestly off the income, to supplement the modest pension of a mid-level government retiree and Social Security.
I manage nicely, but live frugally. I am much better off than my peers who bought houses too large, married "high maintenance" women and nickled and dimed themselves back into debt paying over $100/month for smart phone data plan, another $100 for cable TV, another $500 a month on new car payments and $5000 a year on family travel and vacations...
Great article in Forbes on the status of debt in the average American family. I am glad to have been raised by Depression Kids who lived through WW2 and taught me to save and live modestly, while adequately.
http://fortune.com/2015/07/09/3-reasons-...an-greece/
Whatever happens, the average American may be worse off than Greece:...
Americans actually have more debt relative to income earned
Between its government and its banks, Greece owes 323 billion euros to creditors and its debt-to-income (GDP) ratio is 177%, according to Trading Economics. In other words, Greece owes 1.77 euros for every euro it earns. The average U.S. household, by comparison, owed $204,992 in mortgages, credit cards, and student loans in mid-2015 on a median household income of $55,192, according to data compiled by Sentier Research. This translates to a debt-to-income ratio of 370%, which is much worse than Greece!
Indebted U.S. households carry an average credit card balance of $15,706, according to NerdWallet. Now consider that on average Greece pays only 2.6% of GDP in interest on its debt, according to estimates by think-tank Bruegel cited by The Telegraph. By contrast, the national average interest rate on a U.S. credit card is 15%, according to a report by CreditCards.com, which means $2,355 of annual interest on a balance of $15,706 and 4.2% of median income. This spikes even more sharply on higher interest credit cards, or in the case of a missed payment, which can lead to nearly 30% in interest and therefore 8.5% of median income.
Combine this with stagnant wages for most Americans and the point is that while Greece may have a serious problem, average Americans are living pretty close to the edge themselves, and in the event of a crisis, may face an even more painful reckoning...
Many other forms of debt like credit cards or tax bills are also usually not subject to default, or at least the vagaries of a bankruptcy court judge, and can result in freezing of assets and wage garnishing. All that puts Americans, especially those in the lower-income bracket, in a virtual debt prison compared to the leeway available to a nation like Greece (albeit, not without pain)...
In times of crisis, banks need money to be propped up; without outside aid, they can collapse. Greece can’t print euros, since it’s a joint currency controlled by the eurozone, so if it can’t reach a deal with lenders, it would have to adopt a new currency – the drachma. With its own currency, it can print money, which then enables it to sustain its banking system.
Not a great solution since printing money can encourage inflation, but the flip side is it can avert an immediate crisis and allow the nation to survive.
Unfortunately, that luxury is not available to you and I. So any debt we take on will have to be repaid with our hard-earned earnings at some point, and that’s an important reminder to all of us to be prudent in how we conduct our lives. America’s debt-fueled consumer lifestyle may be attractive and heady, but it can lead to terrible consequences if it continues unchecked.
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