Only 51 Payments To Go

Today I received my first bill for the 2008 Honda Civic that I bought a couple weeks ago. It was scary signing those papers in the dealership and realizing that I was now, officially, in debt. Although I have no doubt that I will be able to handle this loan, it’s still kind of a daunting to know that I used to owe nothing and now I owe thousands.

As I enter my adult life, I am determined to not make the mistake that many Americans have made and not get over my head in debt. At $288, my monthly car payment accounts for 8 percent of my gross monthly income. And since I rent my apartment and have no student loans, that 8 percent accounts for all my current debt. This puts me well below the 30 percent cap that many experts say is a comfortable amount of debt.

Unfortunately, many people in my age demographic are spiraling out of control when it comes to their debt, credit card and otherwise. They are spending more, saving less, and ignoring that golden rule of finances: what goes out must not be more than what comes in. According to the Federal Reserve's Survey of Consumer Finances, 76 percent of Americans in their 20s are in debt. Gen Y consumers are “saddled with more student debt than previous generations, are continuing to rack up credit card debt, and are not putting money away for retirement or other savings.” People my age account for every one in ten bankruptcy filings.

As a whole, Americans hold more than $850 billion in credit card debt and in those households that utilize credit cards regularly the average debt is more than $8,500. That’s a lot of money, especially if you’re only making the minimum monthly payments.

Of course, not everyone gets into trouble with debt because they are irresponsible or reckless. For people who are living on minimum wage, have been laid off or lost their insurance, or can’t cope with rising fuel and food prices, sometimes going into debt is the only way to keep their heads above water. For example, my sophomore year of college I had to have surgery. The cost for the operation plus five days in the hospital was more than $12,000. Luckily for my family and me, my mother’s insurance covered almost all of it. I can’t even imagine how someone with no insurance, making $5.85 an hour would even begin to pay that back.

I am the first to admit that I am not perfect when it comes to budgeting. I love handbags, fast food, and new music, and I occasionally spend more of my discretionary income than I should. But I never spend money that I don’t have. I don’t want to work for 40 years and have nothing to show for it at the end. So I’m going to pay this car bill and every one after it until it’s paid off in 2012. Every month I’m going to put away at least 8 percent of my income into a savings account. And most importantly of all, I’m not going to spend money I don’t have.

For an illuminating and disturbing look at the American credit crisis, check out James Scurlock's 2007 documentary Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders.