Essay Sample on American Debt Crisis

In the U.S today, more than half of Americans live paycheck to paycheck. According to the article “Tackling Credit Card Debt,” the rate of Americans that are unable to pay necessary living expenses is fifty-four percent and twenty-one percent struggle to just pay their bills (Nicole 2). Many Americans lack the financial literacy to stay away from debt, let alone get out of it. American debt has been affecting Americans financially for over seventy years due to the increasing use of credit cards. Informing Americans on financial literacy would drastically change lives for the better. For example, the article “Counting the Cost of Credit Card Debt,” states that a quarter of all divorces are caused by a lack of financial stability (1). American debt has been in effect ever since the 1900s, causing many Americans to drown in debt and never be financially free. Teaching Americans how to stray away from debt would not only help them but better the economy as a whole.

The beginning of debt stems from taking out loans to pay for a college education. College debt has become an accepted practice in students’ lives. Attaining a college degree has become a near necessity when it comes to getting employed and the majority of students going to college take out loans to pay for it. The article “The Bottom Line,” explains that the average student loan debt in America is thirty-seven thousand dollars. Those student loans are the leading cause of financial instability (2). Consequently, the recently graduated student will need to pay off these debts with their new income as the debt accumulates interest. 

College debt is not the only financial struggle that is affecting Americans; car loans carry a huge burden as well. Most young Americans will choose to take out a loan when purchasing a vehicle. Damon Young, the writer of “Counting the Cost of Credit Card Debt,” says, “New cars are rarely purchased without a loan” (1). Not only do the majority of people choose a loan option for a car, they often get a newer car that is more expensive and not a necessity. When choosing to take out a loan on a car, many people forget to consider the consequences of debt. College and car loan debt is a huge problem in today’s society. Both are becoming common practice amongst young adults today. In his article “Counting the Cost of Credit Card Debt,” Damon Young states that “Research suggests that most people are comfortable with accrued debt” (1). As a society, debt is becoming a common theme. There is no such thing as good debt, so avoiding debt is essential to obtaining financial freedom. Car loans and college debt have ruined the financial stability of many young adults in their early lives. Emphasizing young adults to take debt off the table and avoid loans would help the next generation and many more to come. 

The key to financial freedom and stability is avoiding debt at all costs. You can achieve that freedom by paying cash for almost all purchases. The majority of Americans will use a credit card for small and large purchases in day-to-day life. Saving up for small and large purchases will help to avoid debt. The article “Credit Crisis,” explains how using a credit card is much easier than paying with cash. Paying with cash can help prevent overspending and making unnecessary purchases. The main reason why paying with cash is substantially harder than paying with a credit card is because of the physical aspect. Paying with a credit card does not have the same feeling as the physical loss of cash in hand. 

To avoid debt, you must start from the beginning. In the article “The Bottom Line,” it states that student loans are the beginning of most Americans' debt (2). With that being said, the first step is to avoid taking out a student loan. Paying for college without a loan is not very common but it can be a reality. Applying for grants and scholarships is the best way to earn some money, therefore, avoiding student loan debt. Teaching high school students to begin applying for grants and scholarships as early as possible has been proven effective in lowering the cost of college. Another way to get an education at a much lower cost is attending a local community college or trade school: “Going to a JUCO or a trade school is a great idea to avoid student loans and years of debt” (Bottom Line 2). A community college is substantially cheaper than a four-year university. Typically the tuition, books, and other expenses at a four-year are high due to the college being renown to students. Finding the right education, paying with cash, and avoiding loans will set up a successful debt-free future.

Creating a budget for your spending, saving, and expenses is a great tool to prevent going into debt. Many Americans are in debt so creating a budget is a great way to get the debt paid off and help prevent debt in the future. The first step to creating an effective budget is to figure out utility expenses. After the utility expenses have been calculated, the next step is to categorize spending and estimate those expenses. With that estimate and financial goal in mind, come up with reasonable numbers that will need to be followed throughout the month. Jennifer Powers writes, “One way to gain back a bit of control of your career is to understand that things don’t just happen to you, or against you. Things just happen. You are not here to control what happens. Your job is to control how you react to what happens” (1). Powers is explaining that a budget is the responsibility of the person to make and follow. To follow a budget, one will have to sacrifice some spending habits that they enjoy and pay use that money to pay off debts instead. Although a budget is fairly simple, it is the main tool to get out of debt and the best way to avoid it. Most Americans lack the financial literacy to understand how important these steps play in the role of living debt-free and need to be more educated to make better financial decisions.

Debt has been terrorizing Americans ever since the 1950s. Teaching Americans to cut up those credit cards and take debt off the table would set them up for financial freedom in the future. With this freedom, American families can stop focusing on the money they need and focus on the money they have. Students should be educated on student loans and the dangers that come from them. Student loans have been accepted in society for so long since many people use them. A better alternative to student loans is applying for grants, scholarships, and increasing standardized test scores. The majority of students do not take the time to do these things which in turn leads to debt. Emphasizing avoiding student loans and teaching students ways to get free money towards college will start a new era of debt-free living. Americans often make a crucial mistake with their money on their vehicle choice. More times than not, Americans will buy the newest car that is far from affordable. Russell Wild writes that the average American pays five hundred dollars a month on car payments alone (3). A car is a depreciating asset which means the value decreases over time. Spending extra money on a newer and more expensive car will cause you to have a higher car payment, therefore, accumulating more debt whereas paying cash for an affordable car puts you in good standing with no debt. Saving up for small and large purchases is essential to purchasing items with cash. To prepare for these purchases one should begin to save their money over a period of time. As simple as it may sound to save money, the typical American will make credit card payments on small and large purchases because it is easier. An effective way to save up some extra cash for these purchases is to create a budget. Creating an effective budget and developing good spending habits can prevent debt and the consequences that come from it. Across the U.S, many people live paycheck to paycheck due to the high amounts of debt. Having debt is normal in today’s age because people rely on loans for college and to purchase vehicles. However, there are many ways to break the cycle of having debt such as creating a budget, paying cash for items, and applying for scholarships and grants for college. Teaching Americans the steps to understanding finances will help prevent a future of debt and financial instability for generations to come.