Making Financial Sense of a Debt Burden

According to the latest figures, household debt is on the rise. Analysts are quick to point out that US households are borrowing more today than ever before, and the latest figures for Q3 2017 reflect that household debt is up $116 billion at $12.96 trillion, for an uptick of 0.9%. The report by the Center for Microeconomic Data confirms what many households already know: the total debt balance is rising. The cyclical movements of debt over time (since Q4 2001) indicate a low of $8.29 trillion in 2004, and a high of $12.68 trillion in Q3 2008 at the height of the global financial crisis.

Since then, the policies put in place by then president Barack Obama helped to reduce overall household debt as the economy stabilized. The largest component of US debt is housing debt, accounting for around 80% throughout. However, a notable trend has been taking place since overall debt reached a nadir in Q3 2013 – credit card debt has been increasing rapidly. Consider that in Q3 2013, non-housing debt amounted to $2.85 trillion, while housing debt amounted to $8.43 trillion. Fast-forward to Q3 2017, things look markedly different. Non-housing debt is now $3.76 trillion, and housing debt is $9.19 trillion. That amounts to a total debt burden for US households of $12.95 trillion. The percentage increase in non-housing debt is notable. From 25.57% of all debt in 2004 to 26.6% of all debt in 2017. While the percentages don’t tell the full story, the increase in total non-housing debt is substantially higher today.

What is the US National Debt Burden?

Every day, the US national debt is increasing at an alarming rate. At the time that President Trump took office, the national debt was $20 trillion. Today it stands at $20.621 trillion. That amounts to a debt per citizen of $63,044, and a debt per taxpayer of $170,352. On the other side of the equation, taxpayer revenue amounts to $3.388 trillion, with a revenue per citizen of $10,360 and a revenue per taxpayer of $28,010. Clearly there is a dramatic shortfall. US household debt is adding to this burden. There are some concerns about how current economic policies will impact the overall debt burden. Presently, the Federal Reserve Bank’s FOMC has been steadily increasing interest rates. In 2017 alone, there were 3 rate hikes amounting to 0.75%. The current interest rate is now in the region of 1.25% – 1.50%. At its last meeting on January 31, 2018, the Fed decided not to hike rates, but insists that a rate hike in March is likely.

If the Fed moves to raise interest rates in March, this will add further pressure to US households currently under tremendous debt. If we break down household debt, we can see that it fits snugly into the following categories: automobile debt up 1.9%, credit card debt up 3.1%, mortgage debt up 0.6%, and student loan debt up 1%. Contrary to popular opinion, these rising levels of debt are perceived positively by economists until they become problematic. Rising debt indicates that consumers are optimistic about the economy and feel free to spend once again. Debt fueled GDP growth is not advised, but if US households are making timely repayments on their debt, this is a positive for the economy. Anytime you experience difficulty in the repayment of debt, it’s important to seek assistance in a timely fashion. For example, credit counseling services can offer valuable insights into your personal financial situation, and provide a framework for debt repayments, the creation of a budget, and the prioritization of your spending.

Follow Sage Advice for Debt Relief

On a positive note, the unemployment rate remains low at 4.1%, and consumption expenditure comprises 70% of US GDP. It’s important that rising debt levels are balanced by rising income levels. If debt becomes unbearable, it may be time to seek credit counseling advice. There are many ways to deal with credit card debts, understand different types of debt alleviation options, and manage your credit effectively. A sound financial education is imperative to help you get out of debt, and more importantly to stay out of debt. Many terms are bandied about, but an important option to consider is debt consolidation. It requires taking a loan at a lower interest rate than the prevailing credit card debt, and then paying off all existing credit card debts at one time. The simplest advice is always the best advice: cut your expenses, pay off your high interest debt, live beneath your means, and seek professional help whenever necessary.


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