As 2015 draws to a close, the new year symbolically ushers in a clean slate and the opportunity for a fresh start. Unfortunately, while the economy appears to be on its strongest footing in years, many Americans will not be getting a fresh financial start on January 1.
In fact, a new poll conducted by CreditCards.com shows more than one out of five Americans with debt are now resigned to the belief they will never be able to pay off that debt. The 21% of those surveyed that indicated that their debt seemed insurmountable is more than double the 9% that felt that way when the same survey was conducted in 2013.
The American Debt Dichotomy
The number of CreditCards.com respondents who seem to have given up hope on repaying their debts is certainly troubling, but the same survey indicated another faction of the U.S. population is headed in a more positive direction.
As the economy has strengthened, a growing number of Americans have been able to completely eliminate their debt. This year, 22% of those surveyed reported they are now living completely debt-free, up from only 14% just one year ago.
The financial hardships that followed the housing crisis seems to have taught some Americans the importance of financial responsibility. The American Bankers Association reports nearly 30% of American credit card users now pay off their full card balances at the end of every month, a post-recession high. In addition, the Federal Reserve says overall household debt remains 5% below its 2008 peak.
Now more than ever, it’s crucial to double check your credit score. Do it here with Quizzle.
The holiday period is a particularly difficult time of year to remain financially prudent. The National Retail Foundation reports the average American shopper expects to spend $805 on holiday items this year, up $70 from what they spent last year.
As of late November, 37% of those surveyed by CreditCards.com said they had already incurred holiday debt, but about 75% of those with holiday debt expect to have it completely paid off within three months.
The survey also found unemployed respondents were twice as likely to report being debt-free than respondents who are currently employed.
Not surprisingly, more than twice (26%) as many people without children are currently debt free than those with children (12%).
Finally, the survey indicates the average American believes he or she will be completely debt-free by age 54.
Another November credit card debt study conducted by NerdWallet found some similarly discouraging trends.
NerdWallet found the average American household with debt now carries $15,355 in credit card debt and $129,579 in total debt. Americans owe a total of $712 billion in credit card debt, but that number pales in comparison to the $1.03 trillion in auto loans, $1.21 trillion in student loans, and $8.12 trillion in mortgage debt Americans hold. All together, that debt totals $11.91 trillion.
Where Is That Debt Coming From?
With the economy doing so well, why are Americans racking up so much debt? According to NerdWallet, the imbalance simply comes down to income versus expenses.
Since 2003, median U.S. household income has grown 26%. However, in that same time, the average cost of living has climbed 29%, including a 51% increase in medical costs and a 37% increase in the cost of food and beverages.
Make sure you’re using your credit in the most efficient manner with Quizzle.
The Bottom Line
Unfortunately, when it comes to debt, the further you get in, the harder it is to get out. The average U.S. household is now paying $6,658 in interest payments every year. That number represents 9% of the average household income.
If you’re one of the millions of Americans living in debt, why not commit to a 2016 New Year’s resolution to reduce or eliminate your personal debt? Even something as simple as replacing a $8 restaurant lunch every day with a homemade sandwich or soup at work could shave off nearly $2,000 of your debt by the end of 2016.
Paying down debt is not only a financially responsible decision, it can give you a sense of pride and accomplishment and allow you to take control of both your finances and your future.