Americans are no budget role models

Magnifying glass enlarging the word debt

Ever jealous of that neighbor who always drives the trendiest car? How about the family constantly jetting off on some exotic vacation?

It's easy to become distracted by how our friends live and tempting to try to maintain a lifestyle we see others enjoy.

The problem is that each household has a unique financial situation. And what appears to be a lifestyle of ease and glamor might in fact be a cover up for a debt disaster.

This point is driven home in a recent Reuters article that uses the federal debt as a backdrop for a discussion of the dangers of buying what you can't pay for.

Some lawmakers have suggested Washington should look toward the average American family for tips on how to balance a budget, and buy only what the government can afford.

Unfortunately, many households are in the same sinking ship as the government.

From Reuters:

But in looking for ways to balance its budget, policymakers may want to avoid taking cues from American families.

According to the latest Federal Reserve statistics, U.S. consumer credit is at about $2.4 trillion for short- and intermediate-term borrowing on credit cards and for car loans, vacations, boats and college loans. That did not count the trillions of dollars in borrowing for home mortgages.

Americans are juggling about $796 billion in credit card debt alone, according to the statistics.

The report cites an alarming trend that most families don't bother to create a budget.

Yet, the financial problems plaguing both American families and the government can be fixed (albeit slowly and painfully) by following one simple rule for getting out of debt: live within your means.

Simply put, spend less than you earn.

When you spend less than you earn, you have the ability to pay down debt and grow your money through savings and investments, the only way to truly attain financial stability.

The best way to manage your money is to ignore the Joneses and focus on your own income and expenses.

Living below your means might require some sacrifices. But in the end, you may become the very role model others wish to emulate.