The average American has almost the same amount of debt, or more than before the 2008 financial crisis. What type of debt is holding Americans down?
The average household with credit card debt owes $16,061, up 10% from $14,546 10 years ago and $15,762 last year, according to a new analysis of Federal Reserve Bank of New York and U.S. Census Bureau data. The amount of household credit card debt is still down from a recent high of $16,912 in 2008 at the height of the recession. The U.S. won’t hit pre-recession credit card debt levels until the end of 2019, analysis projects.
Total debt (including mortgages, auto loans and student loans) was expected to surpass the amounts owed at the beginning of the Great Recession by the end of 2016, mostly due to mortgages and student loans. Mortgage debt jumped from $159,020 per household in 2010 to $170,800 in 2016, and debt from auto loans grew from $20,032 in 2010 to $28,500 in 2016.
Nationwide, total household debt (including mortgages, auto loans and student loans) now equals almost $12.4 trillion, up from about $11.7 trillion in 2010.
Why the growth in debt, given that many consumers should be skittish about living beyond their needs after the credit bubble of the Great Recession? The reason concerns a problem that has long dogged Americans. Median household income has grown 28% over the last 13 years, but expenses have outpaced it significantly. Case in point: Medical costs increased by 57% and food and beverage prices by 36% in that period.
Many Americans find it difficult to stick to savings goals. And that’s even worse if you have a family. The amount that a two-parent, two-child family needs just to pay the bills (but not have money left over for savings) ranges from about $50,000 to more than $100,000 depending on where a family lives, according to data from the nonprofit and nonpartisan think tank the Economic Policy Institute.
Rent has risen 3.9% in the last year alone, according to the Bureau of Labor Statistics. Rising living costs mean, if anything, consumers should pay extra attention to their budgets this year.