Let’s Make a Plan to Get Collectively Get Out of Debt

Let’s Make a Plan to Get Collectively Get Out of Debt

So here I am once again tackling the elephant in the room: Debt. This blog is more than a collection of posts designed to provide inventive solutions to money problems; it’s a way of life that I have been living. I’m excited to share these posts with you, because they offer workable solutions to the one problem that affects far too many Americans.

Over the years, I have consulted with financial planners, investment consultants, retirement experts, family members, and employers. I take the best advice from the smartest people, tailor it to my personal circumstances and blend it all together. My debt resolution strategies took years to develop, and I’m still learning how best to tackle this issue.

Let’s take a look at the national debt and examine a few key statistics:

  • The US National Debt is now well over $20 trillion
  • The Debt per Citizen averages out to $61,898
  • The Debt per Taxpayer averages out to $167,308
  • US Federal Spending is up 127% at $4 trillion
  • The US Federal Budget Deficit is $689 billion

You don’t need to be an economist, a neurosurgeon, or an investor to understand that there is something wrong with this picture. When the US government is paying $2.5 trillion in interest and the US total debt is $67 trillion, there is a problem. If we look at the revenue side of this equation, federal tax revenue is a paltry $3.313 trillion, with income tax revenue at $1.5 trillion and revenue per taxpayer of just $27,486. The statistics are alarming at a national level, but they are equally disturbing at a household level.

What is US household debt?

US household debt is something that every one of us should pay attention to. The biggest worry we face with household debt is credit card debt. There are growing concerns that the US economy may not be able to sustain the burden currently being placed on it. While the unemployment rate remains at multi-decade lows at 4.4%, the underemployment rate is high at 8.6%. This indicates that the number of people who want to take up full-time employment but cannot owing to scarcity of jobs is persistently high. The costs of living are steadily increasing, and taxes are placing a bigger burden on people than ever before.

The New York Federal Reserve Bank released a quarterly report which indicates that total household debt now stands at $12.8 trillion. This figure is $552 billion higher year on year, thanks to the increasing burden of automobile loan debt and student loan debt. However, the debt/GDP ratio has dropped from 87% in 2009 to 67% in Q2 2017. Student loan debt now exceeds $1.3 trillion, and mortgage-related debt is presently $8.7 trillion. Automobile loan debt is valued at $1.2 trillion. And yet, credit card debt is right up there at $1 trillion. What’s equally important is the delinquency rate with credit card debt, now at 6.2%, up from 5.1% year on year. While it’s a drop in the bucket as a portion of overall household debt, credit card debt accounts for approximately 1/12 of the debt burden.

I am a firm proponent of settling debt quickly , because I’ve seen what it can do to families and individuals. On a national level, we tend to believe that the problem belongs to the government. But, it begins with us. We are the bricks in this leaning tower. If the tower crashes, so too will our retirement portfolios, the stability of our banking system, the housing industry and the entire economy. We must guard against being overly dramatic, but constructive steps must be taken to curtail this debt burden which is becoming a much bigger problem than any other generation has faced. It all begins with a budget, and that’s something we can all work with. Map out your income and expenses, make the necessary allocations and stick to it.

 

I’ve seen some improvements in my personal finances through budgeting. What has your experience been with managing your discretionary spending?

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