Over the past three or four decades we have seen a dramatic shift in the finances of the average American household. People are using credit more than ever which has led to huge amounts of debt. Being as people are now dealing with higher levels of debt than ever before, it only makes sense that some people are having problems related to the debt that they carry around. These problems have been compounded on the tail of the Great Recession, with the average household holing nearly twice the debt that it had prior to the financial meltdown.
The level of debt has begun to go down a bit in recent years, but with high mortgage and student loan balances, people are still having very real problems related to the debt that they have managed to acquire. People from all walks of life are having serious trouble paying off their debts, but lower income households are being hit particularly hard.
Lower income families have seen their financial liabilities grow at a much faster rate than their incomes over the past decade. To put this in perspective, lower income Americans had debt that accounted for nearly 20 percent of their incomes back in 2007. Fast forward to 2013, and we saw those debt levels increase to nearly half of household income levels. And even with all of this troubling information in mind, the average household in the United States still manages to have more assets than debt. However that may not be true for much longer if things keep going the way they have been over recent years.
Because repaying debt is such a concern for so many people, it poses a direct threat to the financial security of millions of families. People are unable to save money, and they are having a very difficult time investing in their children’s economic future and education. The ready access to credit has prevented many people from making savings a priority, which results in big trouble when unforeseen expenses occur.
Of course, without debt, many families would not be able to build credit scores that would allow them to obtain mortgages, get their degrees or even to start new businesses. In other words, as troubling as debt is, our current system depends on a certain amount of debt in order to stay in business. The problem of debt is complex and certainly more complicated than can be sorted out in a single article. However, it is important for Americans to get more educated about debt and how they can responsibly manage the debt that they have built up over time.
This is an area that gets particularly troubling. People do have access to plenty of information about how to be responsible with credit. However, folks are so busy these days that they often don’t take advantage of these resources. It is high time that everyone started to take more ‘ownership’ over their debt; meaning that people need to understand the basics about debt, how to manage it and the very real impact that it can have on their day-to-day lives. Until that happens, we can only expect the problem of American debt to become exceedingly troublesome in the years to come. As the old saying goes, “Those who do not take the time to understand history are damned to repeat it.” There will never be a day when everyone is free, clear and rid of their financial debts forever. However, taking time to get a better handle on how debt affects our lives is something that everyone should commit a little time to.