September 13, 2018

U.S. Consumer Debt Increases

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Despite the fact that 53% of Americans indicate that reducing their debt burden is a top financial goal, consumer debt is on the increase. In 2018, debt across the U.S. rose from an average of $37,000 in 2017 to $38,000.  

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A recent survey conducted by Northwestern Mutual Life highlights how much consumer debt is rising across the U.S. The survey, the financial institution’s 2018 Planning & Progress Study, was undertaken with the goal of measuring aspects of consumer well-being around finances.

Consumer debt has risen on average this year.

The Reality of Debt Growth Conflicts with Goals

Consumer debt on average rose to $38,000 from $37,000 last year, despite the fact that the majority of consumers, 53% say that reducing debt is their top financial priority. This is a significant majority, especially considering that the next highest financial priority cited, establishing a budget, was cited by just 36% of respondents.

For the first time, credit cards tied mortgages as being consumers’ most significant source of debt, with 25% of consumers citing each type.

Not only do Americans have more debt, but there is increasing evidence that a large amount of their disposable income is going toward debt repayment. A startling 20% say that from 50% to 100% of their monthly income goes toward repaying debt. Ten percent expect to be in debt until they die.

Their financial concerns extend into retirement as well, with 78% indicating they are extremely or somewhat concerned about being able to afford retirement. Sixty-six percent believe they may outlive their retirement savings.

The data indicate that, for some, the fears may be well-founded. More than 20% of Americans have no retirement savings whatsoever. Thirty-three percent of Baby Boomers, the cohort either retired or soon to be retired, have only $0 to $25,000 in their savings for retirement.

As a result, more Americans think they will be working past the traditional retirement age of 65. Over half, 55%, think they will work past the traditional retirement age of 65 because they have to work, not out of choice. Thirty-eight percent expect to retire at 70 or older, more than the 33% who expect to retire when they’re between 65 and 69.

A majority still believe they can achieve their financial goals despite debt levels.

A Mixed Emotional Picture

The rising levels of consumer debt, inability to meet goals, and worry about retirement might be expected to mean that Americans feel glum about their finances. In reality, however, their emotional landscape about finance appears to be quite mixed.

More than half of Americans, 56%, believe that debt has either a low or no impact on their ability to achieve financial security. 

Not only that, but 68% indicated that they felt happy about their finances, at least some of the time.

Yet coupled with those strong figures indicating an even keel or even optimism about their financial outlook were more dismal results. Over half, 54%, said they felt anxious about their financial situation, with 25% feeling the anxiety all the time or often. 

Fifty-two percent of Americans said they feel insecure about finances, with 24% saying they feel it all the time or often. Finally, 48% felt fear about their financial outlook.

In short, while debt is rising for Americans, and this conflicts with their financial goals, there is evidence that many feel sanguine about it. But many also feel stress from their financial lives.

A Loan Sale Advisor Can Assist Your Financial Institution

As debt rises, opportunities for financial institutions buying and selling consumer debt climbs as well. But institutions looking to buy debt need to ensure that they receive an appropriate risk/reward. Financial institutions need to approach bidding on debt with eyes wide open and with full information.

A loan sale advisor such as Garnet Capital can help you maximize the benefits and minimize the risks. Register for our online portfolio auction system today.