With Europe in despair and the U.S. economy still sputtering, consumers rolled their eyes like dice, wagering family budgets on Black Friday. Sales increased by 6.6 percentthe day after giving thanks for what we already have, an indication that Congress isn't the only house with a spending problem.
As a whole, Americans have $2.4 trillionin consumer debt, $800 billion of which is from credit cards. It's important to note that paying $300 a month on a $10,000 balance of revolving credit at 10 percent would take 10 years longer to satisfy than a fixed loan with identical terms. In the words of Toni Morrison, "every brothel don't hang a red light in the window".
It's worth noting that consumers moderated their debt and increased savings rates in the wake of the great recession. Whether these modifications are a function of responsible behavior, strict lending practices, the lack of home equity value or some combination of the three remains to be seen. One can only hope the recent $11.4 billion shopping spree doesn't exhume past indiscretions.
Money, however, is often used to mask perceived shortcomings. Some employ luxury items to prove past naysayers wrong while others showcase material possessions to legitimize their self worth and make amends for a deprived childhood. There are also legions of financially disabled children marching through the malls, handicapped by the exuberant lifestyle of parents they attempt to imitate without the proper means.
The opportunity costs of shopping is reflected in the lackluster savings rates, as the average 401(k) balance is $74,900and 25 percentof baby boomers have nothing set aside for retirement. Compared to other industrialized countries, the U.S. ranks behindCanada, Italy, France, Germany and the United Kingdom in the rate of household savings.
And while retirement savings have increased by three percentfrom 2010, a five percent distribution from a diversified portfolio has an estimated 35 percent chance of running out of money within 30 years due to market volatility - every dollar counts. Even those on sound financial footing with clean balance sheets might be unable to maintain the same quality of life once they leave the workforce without an adequate nest egg.