Wednesday, March 02, 2016
Americans Have Big Debts and Little or No Savings
“Financially, I’m set for life… if I’m shot tomorrow." — Mitch Helberg
Though the Great Recession officially ended in 2009, a rather large segment of Americans continues to struggle. Seven years later, large debt loads and absent savings haunt tens of millions of Americans.
According to a recent survey of more than 1,000 adults by Bankrate.com, nearly one in four Americans have credit card debt that exceeds their emergency fund or savings. That’s due, in part, to the fact that many people do not have any emergency savings.
Another Bankrate survey released last year found that 29% of Americans have no emergency savings at all.
Consequently, many Americans are “teetering on the edge of financial disaster,” says Greg McBride, Bankrate.com’s chief financial analyst. “Not only do most of them not have enough savings, they’ve all used up some portion of their available credit — they are running out of options.”
Financial experts recommend that you have no credit card debt and at least six months of savings in an emergency fund, or more if you have dependents.
Yet, just 52% of Americans have more emergency savings than credit card debt, the Bankrate survey revealed.
That’s because debt is so costly. The average household is paying a total of $6,658 in interest per year, according to NerWallet.com.
Credit card debt is particularly costly, carrying higher interest rates than secured forms of debt, such as homes or cars. The average U.S. household with debt carried $15,355 in credit card debt last year.
The problem isn’t due to a lack of responsibility, or to reckless spending.
Household income has grown by 26 percent in the past 12 years, but the cost of living has gone up 29 percent in that time period.
Not only has this driven up household debt levels over time, it has also kept millions of Americans from saving, even though they might like to.
U.S. household borrowing reached its highest level since 2010 in the third quarter of last year. Household debt climbed by $212 billion, reaching $12.07 trillion.
Though that’s down from the all-time high of $13.8 trillion in 2008 when the bubble burst, household debt is once again on the rise.
People are still struggling. Everyone knows the dangers of debt in the aftermath of the financial crisis and subsequent Great Recession. Yet, people must survive, and they are going further into debt to do so.
The end result is that one in four Americans is living on the edge, facing financial disaster.
Chances are, you might be one of them, or perhaps it’s one of your friends or family members.
Sadly, many people are likely suffering in silence, too ashamed to tell anyone of their struggle. That means, you may never know who is on the verge of financial disaster.
If you’re puzzled by this year’s primary season, and by the rise of an ideologue like Donald Trump, or the self-described democratic socialist Bernie Sanders, this awful state of affairs should help to explain it.