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Recent developments in the national economy have caused Americans to consider carefully how they will manage their money during the next few years.
The SymptomsThe nation is suffering from the consequences of mismanaged debt on the corporate level and at home. The over indebtedness of the nation's banks due to the sub prime mortgage market has caused low returns on investments and stockholder's equity. There is uncertainty as to whether law makers can reverse these unfortunate circumstances to avoid a worldwide recession. Incompetence or Oversight?Whenever there is excessive debt, action must be taken to reduce the debt by acquiring more money. Either the firm must seek ways of bringing more money into the company through investments or it must increase production. Moyer, etal, authors of Contemporary Financial Management when commenting on the Drake Company which had been carrying excessive debt stated that, "If the firm intends to reverse these trends, it will have to make more effective use of assets and reduce the use of creditors funds." This causes one to wonder whether sound financial principles were being practiced . Many other corporations, including the nation's top ten banks, have been able to manage their assets and debt so as to increase shareholder wealth. The objective for increasing shareholder wealth for a multii-billion dollar company should include a plan to build up assets. A Budget out of ControlThis seems to be a problem which spills over into the American household. Americans want to live a lavish lifestyle without the extra work it requires. Instead, they turn to borrowing money to finance their lavish lifestyles to keep up with the Joneses. Americans probably do this more out of ignorance than anything else. Few Americans know how to manage debt and how to accumulate assets to stay ahead of debt. Because of the massive rescue mission that the United States government undertook to save Fannie Mae and Ginnie Mac, Americans at all levels must change they way they have been managing their money. Now is the time to attempt to be more productive in generating income to offset the indebtedness. A High Tech SolutionLawmakers and bank managers may be at a loss as to how to solve the current economic crisis, but are optimistic that the economy will improve. It has been reported that the current economic condition is far worse than the two depressions that occurred in the Twentieth Century. However, we have knowledge of why the failures occurred and we have Internet technology which can process and transmit information much faster than our forefathers could. In conclusion, lavish spending at the corporate level and at home has caused a crisis in the economy, but lawmakers have the knowledge and the technology to recover in a timely fashion. People like Warren Buffet have made a fortune investing in companies with strong management.
The copyright of the article Surviving the Economic Crisis in Personal Debt Management is owned by Gail Cavanaugh. Permission to republish Surviving the Economic Crisis in print or online must be granted by the author in writing.
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