What Should Be My Number One Financial Priority in 2006?

Are you serious about really getting your finances in shape in the coming year? Ready to begin relying on a financial plan, rather than blind luck? If so, then put your mental body armor on, because you’re about to be an outcast.

Not everyone can make that hard, 180-degree turn to successfully rein in their family’s spending. Aside from the necessary planning, reading and organizing, there is even another battle awaiting you. This subtle battle will be waged against society at large. It will be waged against your family, friends and co-workers. This struggle centers on seeing our material-centric world for what it is, and dodging a prevalent mindset in our culture today: You must overcome the high consumption/easy credit mentality.

For everything else, there’s Mastercard.

It’s not that we’re trying to single out the folks at Visa and Mastercard or any other credit-card purveyors. They are just businesses, out to earn a profit, and the fact that so many of us carry around empty purses or wallets scary-good at what they do. Read the above slogan again. It says a whole lot. Those five words strip away a lot of fluff. They speak to the heart of a debt-reliant culture. How reliant? Take a look:

Sixty-two percent of Americans report that they are saving and/or investing. However, more than 40% of all Americans save less than 5% of their annual household income. 16% save between 5 and 10%. Only 9% save more than 20% of their annual income.

A recent study, "Asset Poverty in the U.S.," by the Levy Economics Institute found that in 1999, nearly 42 percent of all American households were in "asset poverty." The institute's definition of "asset poverty" was that the family did not have enough in liquid financial assets to support itself for at least three months. Additionally, the report estimated that 46 percent of American households had less than $5,000 in liquid assets. ("Liquid assets," in this case, includes IRAs, whose actual "liquidity" is debatable.)

The American Savings Education Council's 2004 report, Saving and Retirement in America, states that among all workers, 45 percent have less than $25,000 in savings and investments (aside from equity in primary residences). In the age group 25-34, 64 percent have less than $25k in savings; in the age group 35-44, 48 percent have less than $25k; in the age group 45-54, 30 percent have less than $25k. According to a 2002 survey by the Consumer Federation of America, 25 percent of U.S. households have net assets of less than $10,000.

From the May 2004 issue of Cardtrak: Americans' 'real gross national credit card debt' is approximately $2,293 per person, $3,632 per cardholder, about $6,400 per household, or roughly $8,000 per carded household (those with at least one credit card).

What does all this tell us? Well, for starters, poor spending habits (and nonexistent savings habits) are as pervasive as storm clouds in a springtime Kansas sky. Credit cards and revolving debt are now regarded as necessities, staples of everyday life, the everybody-uses-them tool for propping up shaky money frameworks and shiny social appearances. How else, in a country whose median family income is $51,680 (in 2002 dollars) , could we see $75k-$100k households carrying debt loads of $8,000 per person? Ah, but we're an affluent society. We want stuff. And a multitude of lenders are all too happy to give it to us. Mastercard, Visa, Discover, American Express . . . and even your local credit union. "The Dog Days of Summer are headed our way!" advises a credit union in this center-page ad. "Go ahead! Live it up! Borrow $2000 for 12 months ... as low as 8.5% A.P.R." Live it up, indeed. And then proceed to pay it down — with money you don't haven't even earned yet — assuming, of course, that all goes well.

Because debt is so easy. Take a look around. Store windows use neon colors and big block numbers to encourage payment plans. Glossy mailers from Citibank and Capital One flaunt preapproved credit lines. Auto dealerships are loath to quote prices in any form other than Your Low Monthly Payment. The cleanest, most well-maintained businesses on the modest side of town are the payday-check-cashing establishments. Can you do what it takes to walk away from all this? No, really. Be honest with yourself. Can you walk away? Because, judging from the statistics above, it has become painfully apparent that very, very few of your peers can.

You must work hard, develop self control and above all, you must plan. For everyone else, there’s Mastercard.