The Federal Reserve Bank of New York released new information recently that shows that American households have now surpassed the 2008 level of debt. In that fateful year, households accumulated a peak of roughly $12.68 trillion in debt. Today, that number sits around $12.73 trillion, with about 71 percent of that debt being tied up in housing itself (mortgages and home equity loans). The remaining 29 percent of the debt was listed as student loans (10.6 percent), auto loans (9.2 percent), credit cards (6 percent) and “other” (2.9 percent).
The comparisons to 2008 immediately give off apocalyptic vibes, because the obvious thought is that households are accruing debt that could trigger a 2008-like financial meltdown. However, it seems that there isn’t as great a threat this time around.
Still, the rise of student debt and the vast amount of money that people owe on their credit cards is a concern. People are securing new lines of credit and accumulating debt in vast amounts since 2013 — the year that a continuous decline in the amount of debt held by households since 2008 ended. So now is a good time to remind people of good spending habits and financial restraint.
Bankruptcy can help people if they get in over their head, financially speaking. But the better route is to never need bankruptcy in the first place. Practice responsible spending habits and track your credit score and sources of debt to protect yourself from a difficult position.
Source: New York Times, “Household Debt Makes a Comeback in the U.S.,” Michael Corkery and Stacy Cowley, May 17, 2017