It’s been a tough few years for Americans’ wallets, let alone their savings accounts. The Federal Reserve Bank of New York’s latest study found that American household debt had a record-setting quarter at the end of 2023, reaching the highest peak of all time at $17.5 trillion. Here’s a look at the size of major categories of Household debt:
- Mortgages: Loans taken to purchase real estate account for $12.25 trillion of household debt nationwide, according to the Federal Reserve Bank of New York.
- Auto loans: Americans added $12 billion to their total auto loans nationwide in the fourth quarter of 2023, bringing the amount owed to $16.1 trillion.
- Student loans: Student borrowers have a total of $1.74 trillion in student loan debt.
- Medical loans: Consumer credit reports report over $88 billion in medical debt.
With prices regularly increasing, the amount of money left over to pay off debt or put away for a rainy day just keeps on shrinking. Most folks struggle just to make their minimum payments, not realizing they’ll get stuck in a debt spiral due to the massive amounts of interest they pay on all their loans. In an attempt to get out of debt faster, some savvy people turn to the debt snowball. It’s a brilliant system that helps individuals get out of debt years faster than just making minimum payments.
Unfortunately, most people can’t stick with the traditional debt snowball because of how it strips one's lifestyle down to the bare bones. This is relieved through the Debt Free 4 Life™ strategy, which allows them to pay off their debts years ahead of schedule without sacrificing their lifestyle while still learning to save better. Depending on your income and lifestyle, one option may be better than the others. If you have a combined household income of $100,000 or more, you have options – sign up for a free consultation with a Debt Free 4 Life™ advisor to get a customized debt payoff plan suited to your unique situation.
A Wells Fargo study demonstrates growing concern about dealing with inflation. Two-thirds of the respondents surveyed reported they had to cut back on spending. Nearly half said they’d delayed life plans and made difficult financial decisions.
A lot of consumer spending is going toward everyday necessities. Groceries, for instance, cost 5% more on average in 2023 than in 2022, the USDA reported, when historically, food prices have only increased 2.5% per year. As a result, Americans are spending more on food at home than they have in over 30 years. Finding a way to gain financial security without cutting back on your lifestyle has become harder.
When more money is going out the door to keep a household afloat, people start drifting into deeper debt. Consider these warning signs of higher household borrowing:
- Credit card balances: The amounts Americans put on credit cards are at an all-time high, and 44% of respondents in Wells Fargo’s survey said they’re uncomfortable with the amount of debt they’re facing. When consumers can’t pay down as much of their debt, interest payments still add up, costing them more over time.
- Debt carryover: If you can’t pay your full credit card balance each month, you might just make a minimum payment and then let the balance continue to the next month. This trend has been on the rise recently, with nearly half of credit card holders carrying their debt over from month to month. As many as 49% of cardholders are now carrying debt over and for longer periods of time, compared to 39% in 2021.
- Card delinquencies: Late payments are up too. At the end of 2022, the Fed reported 4% of accounts were 90 days or more past due. A year later, that number had jumped over 50% to 6.4% in 2023. Interest rate spikes aren’t helping. The Fed reported the average credit card interest rate recently hit a record of 22.8%, up from 16.3% just a year before.
You don’t have to be a low-income earner to have substantial debt. High earners can also carry significant debt, for example from mortgages, student loans and credit cards.
And if you have a household income of $100,000 or more, there are more creative ways to pay off your debt without increasing your monthly budget or sacrificing the lifestyle you’re so accustomed to.
If you’re ready to pay off your debt years faster instead of sinking deeper and deeper into a debt spiral, then sign up below to meet with a Debt Free 4 Life™ advisor.
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