Yes, you heard it right, my friends. Household debt is rising again, with total household debt reaching $12.58 trillion dollars at the end of 2016. Debt totals jumped by $460 billion this year alone, the highest jump in nearly ten years. Our previous “record” for household debt in America was $12.68 trillion. But for some reason, the experts don’t think this is too terribly bad.
How Household Debt is Rising
Let me break down the increases in consumer debt by type. Here’s the scoop:
- Mortgage loans increased to the highest level since the Great Recession, topping out at $8.48 trillion
- Student loan balances rose by $31 billion in the 4th quarter alone, topping out at $1.31 trillion
- Auto loans increased by $22 billion
- Credit card debt $32 billion to hit a high of $779 billion
But it’s all okay, because delinquencies are down. The delinquency rate is only 4.8% instead of recession levels of 8.5%, and bankruptcy filings were down as well, by 4% compared to 2015.
It’s All Okay – Until You Can’t Make the Payments
For years Rick and I lived with the “We can afford the payments so it’s all good” attitude. Until we couldn’t and it wasn’t “all good” anymore. Then the stress levels associated with our debt went from “high” to “bubbling over”. We were sad, scared and angry. We had to watch our budget like a hawk watching its prey just to make the minimum payments. We had to say “no” to our kids about everything. And it sucked big time.
Then came the first years of trying to pay it off. Two steps forward, one step back. One step forward, ten steps back. Because we’d gotten ourselves in SO deep (can you say “65% DTI”?), we struggled to survive in a big way. It took creative finances, overtime and side hustles to get through the month. And those were the good months.
Many times we added more debt to our debt load because we had no choice – the monthly expenses simply outweighed our income even on a shoestring budget because we had so many minimum payments to try and make.
Then two years ago we had some major family crises, and our debt ballooned to all-time highs because we had extra emergency expenses on top of our regular above-our-means expenses.
Thankfully, after a year and a half of very, very hard work, our DTI is manageable and we are breezing our way to being consumer debt free. But not without a LOT of pain and stress on our whole family.
Lesson learned? Debt SUCKS. And you can’t guarantee that you’ll always be able to make those minimum payments. Read this not-so-happy story for more on that.
If you’re struggling with debt – or even if you’re making the minimum payments “just fine”, I encourage you to pay off your debt as soon as you possible can.
History shows that whenever people get overconfident in the economy and start spending on credit like crazy people, that something happens and it all comes crashing down in a major way.
It happened preceding the Great Depression, and it happened preceding the Great Recession. I pray it doesn’t happen again, but I know that if it does, our family will be prepared. Will yours?
Here are some links to some great articles that will help you turn your finances around, destroy your debt and build financial security.
Friends, do NOT fall for the lie that it’s okay to live life above your means and keep your family drowning in debt. Instead, imagine a life like this:
- Imagine a life where you “owe no man” anything and as such are not tied to your job because you are not tied to your minimum payments.
- Imagine a life where you have tens of thousands in savings and can take advantage of spontaneous vacations, opportunities to give – A LOT, and the ability to buy what you need without depending on a bank
- Imagine a life where you don’t even think about money, where it no longer has to be a priority to work your budget. That’s what happens when you increase your financial security – you just simply stop caring about money because it’s no longer a desperate need in your life.
- Imagine a life where you are free to pursue whatever dreams come your way without having to think “how can I/but I can’t afford it.”Recommended Reading: Spirit Driven Success: Learn Time Tested Biblical Secrets to Create Wealth While Serving Others!This is the reality of a debt free, financially secure life. And it’s awesome. Won’t you join the debt free, financially secure group of people who experience this type of a life every single day?