How does an exceedingly rich person, one whose assets may have a net worth of $1 billion, end up $500 million in debt?

The answer, for Michael Jackson as much as for any of us, is more than likely, bit by bit.

I have seen it with rich people as well as the non-rich. The amount of money you have really doesn't matter when it comes to debt.

What makes a difference whether you can arrange your life around the amount of money you have. Or less than what you have.

What works is having an idea of where you want to go in your life and sticking to that plan, not letting every temptation that comes along divert your money away from your goal.

You want something you don't have the cash for, you borrow. It's the same proposition at $1,000 or $1 million.

You can do it in small amounts, with credit cards or home equity loans, or in large amounts, if your name is Michael Jackson.

You can make bigger mistakes when you're richer. But that's no advantage, as I see it.

He should have gotten help, real help, with money issues.

Where were his financial advisors, as he sank into debt?

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Digging your way out of debt?

For some thoughts on what that’ll do to the big picture, I turn to Jeremy Grantham, the value stock investor and noted bear who has been warning about this financial meltdown for some time. . Grantham is chairman of institutional money management firm Grantham, Mayo Van Otterloo, which manages $120 billion.

From his third-quarter newsletter…

“We were all spending and, in the case of the U.S., importing as if we were much richer than is in fact the case. Particularly here in the U.S., increasing household debt temporarily masked some of the pain from little or no increase in real hourly wages for 20 to 30 years….

"Household debt since 1982 has added over 1 percent a year to consumer spending. Unfortunately, this net benefit does not go on forever.”

This will happen worldwide “and will be a permanently depressing feature of the next decade or so compared with the last decade. It is indeed the end of an era.”

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Why is there so much debt? Why do we spend so much? Why don’t we think it’s great to be as frugal as a Depression-era grandparent?

Ronald Wilcox, former Securities Exchange Commission economist and now a professor at the Darden School of Business at the University of Virginia, thinks of consumers’ excessive debt loads, at its base, as a cultural phenomenon. We, as Americans, are an optimistic bunch. We think tomorrow will be better than today. So we borrow.

Our nation’s economy is strong and has attracted tremendous amount of investment capital. So lenders lend.

And we have developed our credit markets to the point where we can finance anything. So we do. “My wife and I are looking for a golden retriever, “ Wilcox said. “And we were offered a payment plan. You can finance a dog.”

As the author of Whatever Happened to Thrift? Why Americans Don’t Save and What To Do About It, Wilcox says you put all that together and we have a savings crisis. We don’t save, we spend.

He’s one of a group of thinkers who recently have hit on the topic and set their sights on changing our collective direction.

The forces in society that encouraged savings have been eroded, says a report “For a New Thrift; Confronting the Debt Culture,” from a think-tank called The Institute for American Values and signed by 62 scholars. (Wilcox says he would have signed it too, but he didn’t know it was coming out beforehand.) It attacks what it sees as anti-thrift institutions, such as payday lenders, credit card companies after they began targeting risky customers and even lotteries, which especially encourage spending among lower-income Americans.

I don't think these forces can be turned back. I also don’t think anyone’s going to go back to Depression-era ways of spending and saving.

But a little less of living large would be good for all of us.

I like more the idea that thrift is suddenly in style. Frugal is the new favorite way to be. I think a cultural change, rather than a political one, will work.

Have a look at Ron Wilcox's blog at www.usthrift.wordpress.com.

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