How To Beat Down Your Growing Debt
How big of a debt burden are you under?
Hopefully less than the average American. I say that because according to the Federal Reserve of New York, household debt is at an all-time high, even higher than before the 2008–09 financial crisis.
Total U.S. household debt — which includes mortgage, student loan, auto loan, credit card and other debts — climbed to $13 trillion last year.
That’s a lot of debt, but that’s OK as long as you can service the debt and make the payments on time.
Credit card debt is a big contributor.
Fortunately, the peak in people’s debt burden usually coincides with their peak earning years.
The most indebted Americans are those between the ages of 45 and 54, with an average of $134,600 of debt.
The next most indebted age group is 35–44, with $133,100 of debt.
Here’s the actual breakdown by age group:
As always, the devil is in the details, and the types of debt held by the various age groups are very different.
For example, the under-35 age group has the most student loan debt. The average millennial household owes $14,800 in student loans.
The under-35 group carries a $67,400 average debt, which is close to the $66,000 average debt for those between the ages of 65 and 74.
$66,000 of debt for old-timers like me in the 65–74 category may not sound like much but it is much higher than in the past.
Source: Money Magazine
“We’re seeing people carrying much more debt than previous generations into retirement. Before, most people would have already paid off their 30-year mortgage before retiring,” says Ron Rhoades, finance professor at Western Kentucky University.
And with the Federal Reserve in interest rate hiking mode, the carrying cost on those loans is headed higher too. And that could spell trouble for many Americans in the form of rising bankruptcy filings, auto loan defaults and credit card delinquencies.
If you are approaching, or are in, retirement, I strongly suggest that you aggressively pay down as much debt as you can, adopt a saver-not-spender mentality and max out your retirement savings accounts (401(k) and IRAs).
Also load up on investments that generate income, such as dividend-paying stocks, REITs and energy trusts, such as the ones that I’ve previously recommended in Wealth Watch and in my Infinite Income newsletter.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch