What You Need To Know About National Debt
You are not only an individual alone but a part of a nation. Your financial status is closely knitted with your nation and anything that affects the financial standing of your nation indirectly affects yours as well. Just like with the national debt. That is why it is very important that you know what is national debt and prepare for the effects in can do with your life as an individual.
National debt is the sum of amounts owed by the federal government which include but not limited to government liabilities, services and goods payables and pension payments in the future. As of now, the US government debt amounts to more than $15.5 trillion. National debt is two third public debt and one third Government Accounts. There two types of national debt, the internal and external debt. Debt owed to foreign creditors is external debt and internal debt is the amount owed by the Federal government to its citizens; this can be individual investor or financial institutions within the country. The Federal Government can borrow by means of bonds, securities and bills issuance. The Government can also borrow to international financial organizations like the World Bank. But this is mostly exercise by countries with low credit worth. If you invest on government bonds or securities, you are actually lending the government money.
National debt can also be categorized in terms of their repayment duration. Duration can be short term, which must be paid utmost within the year, medium term which repayment is more than a year but less than ten years and a long term debt which can be repaid within ten years or so.
What can cause national debt to go up?
As two thirds public debt, national debt is like your extra personal loan. If it goes up, your personal debt goes up as well. The main reason why national debt soars high is deficit. When there is more outflow of money than with the inflow, this means there is a deficit in the financial flow. If there is a deficit in national finance, this will pile up and adds to national debt.
National debt interest can make it go up too. Another cause is the government’s unplanned expenses and if the revenue is lower than what was expected, debt will go up again. The continuous rise of national debt is affecting the economy.
How can national debt affect you?
High national debt can affect you in three major ways. First it can affect your own personal debts as you will not be able to seek out lower interest rates. Next, it can cause you your job, job opportunities or your business. High national debt can hinder economic stability for the country and its citizens which includes you. And lastly, you have to pay higher taxes. National debt is your indirect debt. You pay for it in your tax.
Looking into the national debt situation in the country will help you a lot in your finance decisions. You will be more aware of your expenditures, give more importance to saving money and manage your debt or credit scores well. It is always best to prepare for whatever affect national debt will be brought to your personal finance.