Since 2008, we are trying to recover from the massive financial crunch we’re encountered that year. But the main problem is that simultaneously we’re also gathering up huge debts.
The approx national consumer debt was $12.4 trillion until the end of 2016. But it was $11.7 just six years back.
At the close of the federal government’s 2016 fiscal year (September 30, 2016), the federal government had (approx):
- $8.5 trillion ($8,542,000,000,000) in liabilities that are not accounted for in the publicly held national debt, such as federal employee retirement benefits, accounts payable, and environmental/disposal liabilities.
- $29.0 trillion ($29,038,000,000,000) in obligations for current Social Security participants above and beyond projected revenues from their payroll and benefit taxes, certain transfers from the general fund of the U.S. Treasury, and assets of the Social Security trust fund.
- $32.9 trillion ($32,900,000,000,000) in obligations for current Medicare participants above and beyond projected revenues from their payroll taxes, benefit taxes, premium payments, and assets of the Medicare trust fund.
Credit card debt is expected to hit the $1 trillion mark in 2017. It’s the highest since 2007, as per WalletHub. Till the 4th quarter of 2016, the total outstanding credit card debt was $978.9 billion. It was increased by 7% from 2015 and approaching towards the $981.8 billion mark of 2007 before housing downfall.
As of March 1, 2017, the official debt of the United States government is $19.9 trillion ($19,920,418,771,289). This amounts to:
- $61,365 for every person living in the U.S.
- $158,326 for every household in the U.S.
- 106% of the U.S. gross domestic product.
- 560% of annual federal revenues.
So, the credit card debt is on pace and going to exceed the pre-financial crisis debt level, approximately within next couple of years. Apart from that, the other largest debt drivers may be the student loans and mortgages.
There are various reasons behind this situation. Incomes haven’t increased as much as the expenses gone up high. Since last 13 years, the normal household income has increased by more than 28%, whereas medical costs have increased by 57%.
The way our national debt level is rising, it might increase the vulnerability of millions of Americans at the time of possible economic downfall. This is a very critical situation for consumers. Incomes are rising in a stimulated pace, which reduces the necessity of strong budgeting. As a result, consumers are freely advancing towards normal spending, despite the fact that their income may not cope up with the increasing costs in the long term. This creates a situation where expenses are managed week-to-week but the total debt is slowly growing towards the breaking point. Soon, it’ll cross the normal income level.
How we can survive and become debt free
Initially, you can take following steps to handle the situation:
You might try to create a paycheck budget for few months. By this way, you can get a clear image of how much of your income and expenses are balanced. If you create a budget for a short period, you can be flexible to modify it anytime if your expenses are outpacing your earning.
b Proper research
You should perform a proper research prior any major new expenses or debts. Even if you get promoted and receive a hike, it is not mandatory that you must also increase your spending habits far ahead. It’s not that you can’t spend money, but you must be wise enough to spend it cautiously in this current economy.
c Debt management plan
Be sure to make a proper debt-management plan to settle your dues as soon as possible. Debt is much costlier than you actually think. So, even small amount of debts with relatively affordable interest rates may wind up to a big mess over time. Try to be regular on your debt payments to become debt free.
Additionally, don’t hesitate to contact a certified credit counselor who can help you to understand your finances and suggest options for getting a debt-free life.