Current economic recession being witnessed in the United States and all over the globe revolves around poor money management and career management skills. Many people just do not know what to do make money. Banks can scarcely give loans to such bad loan prospects and investors can not invest in such banks or manufacturers facing reducing demand!

The way out of a debt crisis is first, do not panic: a lot of financial crisis can be recovered from with prudent management but due to panic, a lot of people fall victim to scams and get rich quick' schemes which do not work. The solution to a debt crisis involves the encouragement of self help cooperatives using tax rebates. This should be aimed at providing their members especially bankrupt members) with a multiple stream of income. Debts can be scheduled based on different incomes available to the household such that needs are met while leaving an amount for savings and reinvestments. This can be guaranteed using an integrated business planning and management system for budgeting.

The cooperatives must engage members in constant financial education in subjects like choosing the right bank, choosing the right credit card, how to invest, how to save and how to teach your children to be financially capable. The latter subject (teaching children) is necessary because bad spending habits are usually inherited from parents with such habits. Membership of a cooperative acts like insurance: settlement companies can be referred to the cooperatives, who handle the problem without its degeneration into a crisis. Membership of different cooperatives can also provide households with counterpart funding.

The effect of this system would be a psychological and physical one: investors recover confidence in the system due to an increase in consumption of goods and services and banks also gain confidence (even in the mortgage market) needed to finance the consumption of goods and services. The consumers learn how to be financially successful and increase their spending, savings and investments: even bankrupt people regain confidence through group effort and this reduces the unemployment queues thereby availing the government with enough funds to fund grants for small contractors.

Finally, debt crises occur also to Governments.Therefore, panicking would be unnecessary because being in debt is not the end of the world but a chance to learn from mistakes and become successful!

Learn more about this author, Anthony Ibegbuna.
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