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Debt is the opposite of wealth. Wealth results from having rights to or ownership of things like land, barns, houses, vehicles, food, and clothes.  In contrast, debt equates to owing other businesses or people money, services, or things.

Of course, every major corporation – including those listed on the New York Stock Exchange or the NASDAQ – has debt.  But corporate debt is a necessary part of a business. Consumer debt is not.

Approximately 80 percent of Americans are liable for some form of consumer debt, such as home mortgages, automobile leases, credit cards, and student loans. Consumer debt is not, however, necessary or desirable.

Consumer debt can be responsible for negative financial outcomes ranging from bankruptcies, which can lead to higher-interest loans in the future, to charge-offs, which can preclude consumers from access to checking accounts and new lines of credit.  Mismanagement of consumer debt can also result in substantial mental health problems, including anxiety, depression, and even post-traumatic stress disorder.

With so many problems associated with personal debt, how does it come about, and why is it so common?

The roots of consumer debt
For thousands of years, people have loaned things to one another in exchange for goods and services of like kind and money, usually resulting in a benefit to the lender in exchange for the risk undertaken.

Today’s system of exchange in virtually all countries revolves around capitalism, which allows people to trade readily-accepted currency in exchange for virtually anything they desire. As such, the vast majority of consumer debt is owed in monetary form, enabling it to be tracked and accumulated by statistics published by governments and other civic-minded organizations.

Why is consumer debt so common?
Most people want more things than they can currently afford. Rather than waiting a few months or years to afford something they desire, most people are willing to spend money they don’t have on objects and services they desire.