Live above your means.

Perhaps you're already doing it but don't know just how serious your negative cash-flow is. If this is your situation, don't despair. You are not alone! It's estimated that 40 percent of American families annually spend more than they earn. About 60 percent of active credit card accounts are not paid off monthly. Average credit card debt among people who have at least one card is $9,205--triple what is was in 1990. Yet 9 out of 10 Americans claim credit card debt has never been a source of worry! What's going on here?

Running our households at "full credit capacity" is the American way of living. A Maxim of conventional wisdom for consumers is: living on credit is fashionable; indulging oneself is fashionable- saving money isn't.

Personal debt is one of those things we all like to forget about. As long as we can keep making the monthly credit card payments, we seem to think we'll be OK. And yet our future earnings are being eaten away at an accelerated rate, and there's no end in sight. It isn't just household debt or personal debt that's at stake here, either. The same addiction to debt exists at the national level, of course, where the ballooning national debt still receives almost no attention (even though interest on the national debt now accounts for somewhere around 17% of all government spending).

Consumer credit has hit an all-time high as a percentage of household income. Put another way, we've never been so indebted. We owe on credit cards, personal loans, and home mortgages. And personal bankruptcies are skyrocketing to the point where nearly 1.5 million Americans filed for bankruptcy in 2004.

By all sane reasoning, these are alarming numbers. And eventually there are consequences. You're going to have to pay of the debt load sooner or later. And for many people, that debt just keeps snowballing. You're paying debt on top of debt, right? And those student loans are due, too, and you barely have enough cash to pay the rent and the car loan.

Sound familiar? I know; I've been there, too.

To make matters worse, we're all told that we have to keep spending to help the struggling economy. It's misguided, of course, since increasing personal debt across the board does nothing to help the economy in the long term. It's a simple fallacy that spending--any spending at all--is "good" for the economy. In fact only useful spending is good for the economy. Spending on meaningful education, say, or investing in new technology or equipment that can be used to create new prosperity--now, that's "good" spending.

Finally, we have predatory lenders playing their part in all this. Banks are cashing in on the now-popular theme that you can erase your credit card debt by refinancing your home. That's great until you realize you're back in hock with the credit card companies a year later, and now you have increased long-term mortgage debt. The real problem is that people just spend way too much. They buy a lot of things they don't need, and they keep buying day after day, year after year, regardless of their ability to pay it.

Eventually, this collective national bill is going to come due.

We can't keep spending forever, not as individuals, not as a country. And the price for the bail-out is going to be steep. U.S. currency valuation will continue to fall on the global market. Personal financial misery will continue to rise. It's as inevitable as gravity.