Patrick Henry, the renowned American patriot, declared “If you don’t give me my freedom, I’ll kill you.
Economic shock from the COVID-19 pandemic led to the country’s motto being re-evaluated “Give me debt, not financial freedom!”
Federal Reserve estimates that household debt in the United States will reach $14.6 trillion in the spring of 2021, a record high. In order to pay the bill, you’d have to write a check for $14,600,000,000,000.
Fortunately for you, you’re not alone; over 340 million people are saddled with the same burden. When it comes to getting into debt, who are the most likely?
It all boils down to age, income, ethnicity, family structure, and education level. Debt is not solely based on demographics, but it is necessary to be aware of these numbers.
It can inspire you to defy the odds and achieve financial independence. For a look at the past and present demographics of debt, here are some stats.
What percent of the US population is in debt?
How many people in the United States are struggling to make ends meet because of their mounting debt? Experts estimate that about 80% of Americans are underwater on their credit cards. excluding housing debt, the average American owes $38,000, with consumer debt accounting for 8 out of 10 of that total. Our aggregate $14 trillion in debt seems to be a way of life for Americans. That sum continues to rise. Mortgage debt, vehicle loans, school loans, and credit card debt are all examples of consumer debt. Americans’ debt load is growing rapidly as a result of unpaid medical bills and sky-high medical expenses
What percentage of American families are in debt?
Debt levels in the United States have risen. In the United States, more than three-quarters of all households are in debt. Mortgages and vehicle loans are the second and third most popular forms of debt, respectively. Credit card debt, mortgage debt, and car loans make up about half of all households.
What percentage of US population lives paycheck to paycheck?
PYMNTS and LendingClub reviewed economic data and census-balanced surveys of more than 28,000 Americans and discovered that 60 percent of millennials earning more than $100,000 per year are living paycheck to paycheck, according to the survey.
About 54% of Americans, according to the study, are living paycheck to paycheck. Of those who earn more than $100,000 yearly, over 40% say they do the same.
In other words, millennials who make six figures a year aren’t the only ones who are stretched too thin. It may consequently be less about income and more about expenses, according to the paper.
At what age should you be debt free?
This year, “Shark Tank” investor Kevin O’Leary declared that the optimal age to be debt-free was 45. According to O’Leary, it’s at this point in your career that you should begin to increase your retirement savings to ensure a pleasant retirement.
The choice to pay off debt, especially for homeowners, is more complicated than O’Leary’s counsel would lead you to believe (more on that below).
Taking O’Leary’s advise if you have high-interest debt, like credit card debt or an auto loan with an APR in the double digits, might be a smart move. Credit card debt may easily cost you hundreds of dollars in interest and take you years to pay off unless you prioritize a repayment strategy.
How much debt is average American in?
“You have to spend money in order to make money” is a well-known statement. However, there is little question that people spend more when they have more money in their bank accounts.
According to a CNBC study from 2021, the average American has $90,460 in debt. Personal loans and mortgages were among the consumer debt instruments that were under this umbrella of products.
How much debt is OK?
In order to avoid risk debt, you should never have it in the first place. Don’t take on more debt until you’ve figured out how much you can afford to pay each month, as well as how much money you can save.
For example, lenders and other financial institutions often recommend that you keep your entire monthly loan obligation under 36 percent of your gross monthly income.
Your credit card balances keep getting higher.
If you can’t pay off your credit card amounts in full each month, you should at least be making a steady effort to reduce them. It’s a significant concern if you’re not making your payments on time.
You’re not saving for retirement.
If your employer matches your 401(k) contributions, not contributing is like throwing away free money. The same is true if you don’t have a workplace retirement plan or aren’t making contributions to an individual retirement account (IRA).
You use low interest rates as an excuse to buy too big.
You don’t have to buy the most expensive car on the lot just because you can get financing for it at a low or no interest rate, for example. You still owe the money you borrowed from the bank. It’s possible that your loan balance will exceed the value of your automobile when you sell it if you take out a long-term auto loan (more than four years). Limit the loan term to four years or fewer by putting down as much money as you can.
Why is America in debt?
Home mortgages, vehicle loans, school loans, and credit card debt are the four main sources of American debt. More than $9 trillion of the $14 trillion in debt is attributable to mortgages. Low interest rates on car loans have contributed another $1.3 trillion to the total.
Consumer debt in the United States has never been higher at $1.48 trillion thanks to student loans. For the average student loan borrower, this equals $35,000 in unpaid student loans. It’s the last $1 trillion in American debt, with the typical consumer owing $6,000 on four separate credit cards.
What is the average credit card debt in 2020?
In 2020, individual consumer debt will fall from $6,194 to $5,315 on average. In fact, every state’s average balance decreased.
The coronavirus epidemic in 2020 led to a decrease in both outstanding credit card debt and credit limits from issuers. Economic impact payments and additional unemployment benefits have been cited as the primary factors in reducing the balances, which have been decreasing since the outbreak of the Ebola virus.
34 percent of consumers had their credit card limits reduced at the beginning of the financial crisis, according to CompareCards.com.
How many American have no savings?
Bankrate found that 25% of people in the US have no emergency funds. As Bankrate’s Greg McBride explains, the pandemic’s high savings rate does not tell the whole story. It’s clear that the effect hasn’t spread evenly across the population, he said. Low-income families had a difficult difficulty putting money away.
How much does average American have in savings?
According to Federal Reserve data, American households held a median amount of $5,300 in their transaction bank accounts in 2019. Additionally, debit cards and prepaid debit cards are part of the transaction account category.
Because the average is strongly distorted by high-income outliers with huge deposits, the median figure provides the best approximation of how much most Americans have saved. We’ve broken down these figures by age, income, ethnicity, and education to show how these numbers change across various populations and cross-sections.
What is considered wealthy in the US?
When it comes to wealth, Americans feel that an average net worth of $1.9 million is required to be considered wealthy. To put it another way, you’d have to have a home worth close to $2 million in order to get out of a mortgage.
However, you may have a different understanding of what it means to be wealthy. If you have a net worth of $1 million, some people may consider themselves wealthy; if you have $5 million, they may not. It all comes down to what you’re hoping for. For example, the amount most respondents claimed they needed for financial happiness was $1.1 million, and you may conclude that reaching financial happiness is enough to make you affluent.
In the end, once you have a positive net worth (instead of owing more money than the value of your assets), it’s truly a personal choice of just how high that net worth has to be in order to feel wealthy. If you keep an eye on your net worth, you’ll know if you’ve hit your goal.
