You’re spending a lot more money than you have again.

When I say “you,” I don’t necessarily mean you. I believe my readers tend to be smarter than that. 

Or maybe being smart has nothing to do with it.

Earlier this month, the Federal Reserve released data that shows that in November, consumer credit jumped by a seasonally adjusted 11%. Revolving debt reached $1.02 trillion, which was the highest since the pandemic began in March of 2020. CNNBusiness quoted a Moody’s Analytics report as saying Americans had $717.2 billion in credit card debt in December. 

Analysts say this is probably due to holiday shopping, but Americans clearly have regained their plastic wand skills after holstering their cards, and paying down a lot of what they owed, through much of the pandemic. 

Many of the same analysts say this isn’t much to worry about, yet. I disagree.

The rules of good money management haven’t changed. But the headlines have. Inflation is robbing people of much of their earning power, and last week the Federal Reserve signaled it probably will begin raising interest rates this year in an effort to tackle rising prices.

Tricky prospect, that. 

As Mike Walden, a Reynolds Distinguished Professor Emeritus at North Carolina State University, wrote for, what the Fed is doing is like trying to take its foot off the gas pedal of a speeding car. 

“Unfortunately, the ‘gas pedal’ the Fed controls is not precise,” he wrote. “The Fed never knows exactly how the economy will respond when it pushes down or lets up on the pedal.”

But what is known is that higher interest rates will make borrowing money more expensive. That means it will become harder for businesses to expand, which could hurt hiring or, in the worst cases, lead to layoffs. 

It also makes it more expensive for regular people to use credit cards or to assume mortgages. 

Type “the end of free money” into Google and you’ll get a list of stories and analyses from recent days, all speculating on the same thing. Here’s a sampling of what I found late last week:

“Markets have fallen because the era of free money is coming to an end,” said an editorial in The Economist. “The end of easy money,” said a Washington Post headline to a column by Bloomberg’s Paul J. Davies. “The Fed wants to cool the economy. What that means for you,” was the tantalizing subject line of an email from The Atlantic.

Easy money — interest rates near zero and checks from Uncle Sam in response to the pandemic — didn’t just tantalize regular folks. Politicians were so taken with low interest payments on the national debt that they made drunken sailors look like virtuous penny pinchers. 

And if the Fed’s gas pedal doesn’t work? Well, this is how New York Times columnist Bret Stephens put it recently:

“If inflation persists, it won’t take much of a rate hike for the cost of servicing the debt to become ruinous for governments and businesses alike. Like an addict who can’t endure the agony of withdrawal, we could soon arrive at a moment when we will not be able to accept the price of taming inflation, and instead we’ll be tempted to inflate our way out of our debts. That won’t end well.”

Some are even whispering the R-word, predicting we might need a recession to tame the asset bubbles all that money has created.

If you’re wondering what to do about all this, examine your spending habits. As I said, the rules haven’t changed. lists seven ways to survive a recession, but they’re the same for surviving good times, as well: Have an emergency fund, live within your means, find a way to make additional income … you’ve heard it all before.

Why did I say smarts may have nothing to do with the way we spend? Because people and businesses tend to follow the incentives the economy gives them. 

For years now, banks have told you they don’t want your savings. Maybe they haven’t said it in words, but they have in interest rates. put it this way: If you have $10,000 in a passbook savings account right now, you’re losing. Bank interest rates have averaged about 0.06%, meaning you made $6 per year while inflation took hundreds in buying power from your total. Some advisers have been telling people to keep six-months of wages in the bank, then take out cheap home equity lines of credit to invest in something with a better return.

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But in the end, maybe smarts does have something to do with it, after all. When rates rise, adjustable rate equity loans will rise, too, along with credit card interest.

Maybe the message is it’s just too hard for average people to try to win by gaming the system in volatile times.

The news isn’t all bad. During the recession, Americans ignored what the banks told them and started saving, instead. That was good while it lasted. In April of 2020, the national savings rate rocketed to 33.8%. But by October of 2021 it was back down to 7.2%, according to

We may soon wish more of us had kept ignoring them.

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