- Credit card debt is at an all-time high – and still on the rise.
At the end of Q4 of 2018, the Federal Reserve Bank of New York announced that U.S. personal credit card debt hit the $870 billion mark. Not only do they expect that number to hit $900 billion in 2019, but it also marks the highest level of credit card debt EVER!
That also indicates that our reliance on plastic has shifted from a healthy sign of consumer spending and confidence to a problematic dependency. For instance, more and more people are putting basic household goods and necessities on their credit cards, and they’re also carrying balances form month to month without paying them off.
- But student loans debt is almost twice as high!
If you think that credit card debt trends are alarming, we’re being buried in an avalanche of student loans. Total student loan debt in the U.S. has reach a nearly-unbelievable $1.57 TRILLION, with no slowing in sight. While that number is even hard to conceive, consider that the average college graduate now leaves school with more than $30,000 in student loans, and 81% of college graduates with educational debt say that they’re making big sacrifices just to keep up with the burden of monthly payments. With the cost of public and private secondary schools still climbing, this trend will be a major influence on our society going forward, from housing to politics and everything in between.
- Remember when people used to have savings?
It’s not hard to see why people aren’t saving more money, but the data on personal savings is still more than a little shocking. While traditional financial wisdom is that we should save 3-6 months’ worth of bills and expenses for an emergency or rainy day, 40% of U.S. adults couldn’t even come up with $400 by the end of today without borrowing or using debt! Of course, our lack of cold, hard cash stored away only reinforced our reliance on credit cards and other loans.
- Our retirement goals are in jeopardy
A systematic decrease in savings and investments has become the new norm in our society, but the retirement planning numbers just aren’t adding up for a record number of Americans. In fact, only 46% of Americans – well less than half – are now confident that they’ll reach their retirement goals, which means that the majority of the U.S. plans on falling short. With a tidal wave of people reaching their senior years and retirement age over the next decade (10,000 Baby Boomers reach 65 years old EVERY DAY until 2030!), and Social Security and pension shortfalls, expect more people to be forced to work well into their golden years.
- We may see another bubble pop, but this time, in the auto loan market
In the last financial crash and Great Recession of the late 2000s, we saw the real estate and mortgage industries poison our entire U.S. – and, eventually, world – economy. While the housing market seems strong and the mortgage market has been cleaned up to a large degree, we may be facing another bubble set to burst, but this time, with auto loans. In fact, 7 million U.S. adults are at least three months behind on their car payments – a pretty alarming stat. With the average new car loan bringing payments of $523 per month and new car and truck sales through the roof, we may be speeding towards a financial fender bender!
- Homeownership seems to have hit the bottom and bounced
At the end of Q1 2019, the U.S. homeownership rate sat at 64.2%. If you’re asking if that’s good or bad, let me put it to you like this: that falls woefully short of the all-time high homeownership level of 69.2% in 2006 or the historical average of 65.2% However, since bottoming out at 63% after the mortgage meltdown and real estate crash, we’ve made slow but steady progress with more people owning a home instead of renting.
Will that improvement continue? Probably not, as the rising cost of houses in most metropolitan areas coupled with our increase of debt payments compared to real wages is making it harder for the average family to buy. Already, we’ve seen a slight dip in homeownership rates since the end of 2018.
- Credit Scores are surprisingly solid
We may be setting personal records (and not in a good way!) for levels of credit card, student loan, and auto loan debt, our credit scores don’t seem to be suffering. Actually, it’s quite the opposite, as the average FICO score is now 704. That’s pretty impressive considering that FICO scores range from 300 to 850, with above 700 considered very good and approaching the excellent range. But it makes sense when you think about it, since credit score measures risk factors when it comes to debt, and we’re definitely using our debt like never before!
If we start missing payments on a large scale, though, then we can expect that average score to plummet below 700 fairly quickly.
Of course, you can contact Blue Water Credit if you ever have questions about your score, your credit report, or how to improve your FICO!
