The Western society is part of the boom and bust culture, with the economy in the US being specifically vulnerable to periods of sharp decline and sudden growth. This is the case now and has been for past generations, which has made the US economy more susceptible than ever, mainly due to this reckless financial behavior.
When it comes to the recent recession, there are two things that have renowned this from past economic declines. Firstly, the recovery speed has been much slower and less tough. Secondly, the GDP growth forecast for the quarter of the US cut to 0.3 percent. Equally, it looks as though citizens are getting back their confidence in the economy at a fast pace.
Financial Risks Consumers Still Take
At the start of July, the confidence of consumers slightly diminished. The figure recorded as 84.5 in May, with the figure being 83.9 in July, which stayed only a shade below the second recording. This shows that when it comes to consumers spending in the present economic climate, they are accepting an approach that is less risk-averse. However, it remains unclear whether this result is from general boredom towards the continuous cycle of bust and boom or if it is strong sentimentality.
If there is going to be a recovery in the future or not is weakened, especially if the users are becoming more insensitive to the harsh severity measures and the impact of economic failure. This is mainly because citizens will remain to spend outside their means and will keep taking financial risks and continuing the reckless financial behavior. They will fail to appreciate the potential outcome for both the wider economy and of course for themselves. Carrying out reckless financial behavior and taking risks with your money daily can turn out to influence your future negatively; do you know how?
Obligating to Uncontrollable Big-Ticket Purchases
The mindset of consumers in the nation can be indicated by the level of borrowing and debt. If nothing else, this particularly shows how responsible they are to manage their finances. Since the 1950s, growing household debt was decreasing at a very fast rate, which has begun to level off during 2012. The rate of consumers borrowing has begun to increase at the same time, especially with the further $19.6 billion credit citizens took on during May.
This kind of growth hardly supports increased borrowing and is something that one should refrain from if they do not have a permanent position of employment or a suitable income.
Failure to Defer Student Loans
The current generation of former students finds it very difficult to look for work that is well-paid. A survey was conducted not so long ago and showed 40 percent of 2,000 students considered themselves to be failing in the quest of their career goals or being underemployed. This is a big concern in the US for student debt, which has reached to over $1 trillion. This type of reckless financial behavior has forced many students to think twice about their repayment options.
Students who fail to notice their situation and choose to linger with this reckless financial behavior by forcing an active explanation are taking a massive risk. The buildup of continuous missed payments can lead to heavy tax burdens as well as damaging the individual’s credit score. In order to avoid this, it is important that qualified students think about demanding a rearrangement of their repayments. With this, students who are underemployed or out of work are provided financial relief for a set period. This is something that must be done quickly, as candidates that are over 270 days late on repayment for their loan are not entitled for this process.
Failure to Purchase Travel Insurance
Consumers, due to the lack of risk aversion may forcefully make hasty and foolish spending decisions, which is reckless financial behavior. This may also be an encouragement for them to abandon purchases that are important, just so they can save some money. A clear example is travel insurance, no matter how much peace of mind and sincere financial protection it provides, it is usually a second thought for US tourists. A survey carried out by thepointsguy.com showed that only 37 percent of Americans appreciated the value of travel insurance. The purchase rate was only 21 percent, for those who considered it each time they travelled abroad.
This has become a portion of the global trend and now, only one in four citizens of Britain are travelling without insurance since 2012. The figure in 2011 was one in five, which shows a rise in individuals becoming more desensitized to financial risk. There is no sign of failing with travel insurance, especially when one looks at the low cost and its benefits.
The Bottom Line
All the financial risks mentioned above seem both small and insignificant; however, they do offer an insight into the lethargic consumer mindset, which seems to be increasing. Ensure you do not put your financial situation at risk and keep away from carrying out reckless financial behavior.