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As the austerity that followed the Great Recession recedes in the consciousness of many Americans, consumer debt is starting to creep up again.

Although many individuals are doing well in the current economy, we should not forget the lessons taught by the Great Recession. Here are some thoughts about avoiding the easy-to-fall-into financial habits that can push individuals and families into economic trouble.

Eliminate Emotion and Sentiment from Financial Decision-Making

People who are experiencing high salaries, or who see incomes around them increasing, can find themselves in spending mode – especially individuals who like to indulge in emotional spending as a way of improving their mood or self-esteem. The result: They may act on impulse and purchase big-ticket or unnecessary items.

As the current state of the U.S. economy proves, positive sentiment may mask underlying issues in the labor and financial markets. It is therefore wise to make expenditure decisions based solely on your own financial circumstances, paying particular attention to your annual income, expenses, nature of employment and long-term fiscal goals. (See also: Logic: The Antidote to Emotional Investing.)

Distinguish Between Actual Wealth and Credit

While consumers strived hard to diminish this debt and use their plastic wealth more responsibly, credit card borrowing is rising, as noted above. This news may help retail sales, but recent history suggests that today's consumers must make the clear distinction between the money they actually have and credit if they are to avoid incurring cyclical debt.

More specifically, citizens should avoid making short-term credit card purchases that are disproportionate to their monthly salaries, as this ensures that they can repay their balance each month and avoid the accrual of long-term debt and interest. (See also: Expert Tips for Cutting Credit Card Debt.)

Embrace a Frugal and Sustainable Lifestyle

There are often clear parallels between government and consumer spending during periods of recession, as harsh austerity measures may often be applied to compensate for spells of irresponsible and disproportionate spending. These two extremes are likely to trigger fluctuating periods of boom and bust in an economy, or leave households struggling to accumulate wealth and achieve long-term financial stability.

There are some economies that may offer an example to consumers, however, with the Australian model renowned for its resilience and capacity to sustain growth during periods of stagnation. This was most evident during the recent recession, when banking institutions were managed conservatively and capital was invested into supporting long-term reforms rather than short-term solutions.

Consumers can learn a lot from this, as responsible lending and the development of a long-term, frugal lifestyles can help to create financial security. (See also: Stop Keeping Up with the Joneses – They're Broke.)

The Bottom Line

If the global economy is to achieve long-term growth and avoid the unenviable cycle of boom and bust, it is vital that government bodies and citizens remember the harsh lessons of the Great Recession. The approach to spending is particularly important, especially among consumers who have previously borrowed money irresponsibly or spent outside of their existing means.

By being responsible in their approach and basing spending decisions on relevant facts and personal circumstances, citizens can enjoy a more financially secure existence and future. 

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