2021 Consumer Debt Statistics

man checking debt

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Total consumer debt amongst Americans rose 4.7 percent and hit just below $4.2 trillion in September 2020, according to the Federal Reserve. Collectively, Americans owe 10 percent of their disposable income to non-mortgage debts like car loans, credit card accounts and student or personal loans. 

Americans have been amassing more and more debt since 2013—although disposable income has increased as well. Though income is increasing, American consumers are borrowing more money more often. 

What’s causing these changes in behavior? Recent studies have shown that Americans are losing their financial literacy at an alarming rate. These studies, which cover topics like basic finance and investment, show that Americans lack fundamental knowledge in these areas. Perhaps that explains the marked uptick in consumer borrowing. 

To dive further into consumer debt and learn how to properly manage it, let’s first understand exactly what it is and how it works in our financial systems.

What is consumer debt?

Consumer debt is personal debt owed by an individual to another entity, typically a bank or credit union. Consumer debt often involves household purchases and transactions independent of a business or government operation. It does not include debts owed by a business or corporation to another entity.

These purchases are typically consumable and include items that do not depreciate in value. Purchases like this allow consumers to better themselves through a purchase without the requirement of paying the full purchase price up front. For example, consumer debt may come in the form of auto or student loans.

Also referred to as credit debt, there are typically two types of consumer debt: revolving and non-revolving.

Revolving Consumer Debt

The most common example of this type of consumer debt is credit card debt. This kind of debt is referred to as revolving because it is meant to be paid off frequently, typically within a month. Federal Reserve fluctuates with consumer use and usually comes with a variable interest rate.

Non-revolving Consumer Debt

Conversely, non-revolving consumer debt is not on a particular payment schedule. Instead, payments may be seen as “fixed” and are usually active for the life of the underlying asset. This type of consumer debt may include long-term loans for cars and education. These debts typically include a fixed payment plan with few changes to the amount charged. It is possible for consumers to choose between fixed and variable interest rates for these debts in some cases.

Consumer Debt Statistics

consumer debt chart

The following statistics come from the Federal Reserve’s Consumer Credit G.19 release:

  • Total consumer debt totaled $4.161 trillion in September 2020, increasing a total of 4.7%.
  • Average consumer debt per capita is approximately $12,596 (total consumer debt as of September 2020/total US population as of September 30, 2020).
  • Total revolving consumer debt was $989 billion in September 2020.
  • Total revolving consumer debt saw a huge drop of 30.8% in Q2 of 2020
  • Despite the drop in Q2, total revolving consumer debt rose 4.8% in September 2020.
  • Average revolving debt per capita is approximately $2,992 (total consumer debt as of September 2020/total US population as of September 30, 2020).
  • Total non-revolving consumer debt was $3.173 trillion in September 2020.
  • Total non-revolving consumer debt increased by 4.6% in September 2020.
  • Student loans totaled $1.7 trillion in September 2020.
  • Auto loans totaled $1.223 trillion in September 2020.
  • Average loans per student equal approximately $86,075 (total student loans in September 2020/total students enrolled in public and private universities in 2020)*

*Total enrollment based on a 2020 projection of students in public or private universities

student loan debt total $1.7 trillion in 2020

  • One in ten adults says they carry a credit card balance over $5,000. [Source: NBC]
  • The average credit card balance per person in May 2020 was $5,338, which was a 14% drop from the beginning of the year. [Source: Experian]
  • The average personal loan debt reached $16,257, which was a 2% increase from the start of the year. [Source: Experian]
  • 75% of consumers who have a credit card have a balance over $6,200. [Source: Experian]

Barring two recessions and the economic impact of COVID-19, consumer debt has increased steadily over time, with minor drops in 2020. It is possible that total consumer debt may break four trillion dollars within the next decade.

If you’re unsure how to begin tackling your personal debt, there are many available resources to help you. Paying your monthly fees on time and maintaining your credit can also help you reduce your loan amounts over time.

You can also start up a conversation on our social media channels. Like and follow and interact with us on Facebook, Instagram, and Twitter.

Source: lexingtonlaw.com

The ABCs of Financial Empowerment

A quick Google search of ‘financial literacy’ will yield thousands of results, listing an infinite amount of do’s and don’ts that should (and shouldn’t) be followed to guide you along on your financial journey.

However, when you think of financial empowerment – what comes to mind? As defined by Merriam-Webster, empowerment is “the act or action of empowering someone or something: the granting of the power, right, or authority to perform various acts or duties.” No matter what your current sentiments are related to your finances, we will explore three key areas to not only embrace; but to help you prepare for a strong financial future.

Awareness

Now more than ever, we all have a laser-sharp focus on our money and where it’s being spent. The pandemic has generated a hypersensitivity to how we treat our finances while also determining what essential expenses look like and where they fit into our budget.

Before life as we knew it to be shifted, many of us don’t have to look too far back to remember a time where we didn’t check our accounts as often, our savings plan would fluctuate month-over-month or our emergency fund was used to bail us out of some impulsive spending.

To make sure those days are forever of the past, make it a habit to take inventory and audit all of your accounts. Take at least 15 – 30 minutes to review over any transactions and deposits across all active accounts. Not only does this help improve your self-accountability, but you are also able to make any disputes if anything appears incorrect and resolve quickly.

Another small but impactful tip is to acknowledge your financial health. What top three areas will be your main point of focus? If this is something you don’t know offhand, review your transactions from the last three months and categorize them. How much of your money went to impulsive buys or things that could have been purchased at a later date? Are you seeing an influx in overhead expenses or credit card payments? Are there any spending patterns you can explicitly see? Allow this exercise to serve as an eye-opening experience.

In order to determine where you want to be, you must first truthfully acknowledge where you are. This sets the blueprint and overall expectations with your personal finance journey. Knowing where you are may not feel pleasant but avoidance will lead to bigger consequences.

Betterment

Even though we don’t like to admit it, there’s always room for improvement and our finances are no exception. The first thing that guarantees mastery is actually following the budget that’s created. This serves as a guardrail – it’s used to keep us on track so we can greet our financial destination with open and inviting arms.

Once that’s in motion, explore ways to enhance your financial experience. Begin by automating recurring expenses, such as cellphone service or utility bills. That’s why it’s so important to be as honest and accurate as possible when setting a budget. Nothing should come to you as a surprise outside of any emergencies. When you trust yourself and the financial work you’ve put in, your finances have no choice but to follow suit.

If you haven’t already (or need to get back on track), work to beef up your emergency fund and savings account. Emergency expenses have a tendency to appear out of nowhere, so you want to dedicate a set dollar amount or a percentage every pay period. Setting up an automatic transfer to these accounts establish a routine while putting your mind at ease in the process.

Is there a hobby or skill you’d like to put to use and monetize? No matter how grandiose or small, this can definitely expedite achieving your financial goals. The money earned from a passion project can go toward savings, paying off debt or simply getting back to a place of comfort financially. Vacation funds or prepping for large purchases such as a car or home can also fall within this category. If you want to seek the assistance of a professional, search for financial advisors or coaches that could help you with reaching your goals. Preparation is key and your future depends on it!

Confidence

The foundation has been laid and you’ve been committed to crushing your financial goals. The budget and savings goals are in motion; so what’s next? It’s time to celebrate! Walk into your financial future with your best foot forward. When times seem bleak, remind yourself of your goals early and often.

Reinforcement such as daily reminders on your phone, having goals posted somewhere in your home you can see daily or reciting positive financial affirmations will serve as a second wind when you want to throw in the towel. Be sure to celebrate wins along the way such as debt payoff, reduction or hitting a new savings goal. Never been able to invest before and now you have the additional income to get in the game? Celebrate that!

The best way to generate excitement is to rally your family and get them involved. Create family challenges to get your children excited about saving funds and reallocating money. Come up with creative ways you all can commemorate knocking out a goal by ordering from your favorite restaurant or saving for a family staycation.

In order to walk in confidence, you have to build up the courage to begin no matter where you are or how many times you’ve had to start over. Each step counts – each successful budget, savings goal and consistent reduction of overall expenses. Be sure to keep in mind, financial freedom looks different for everyone and has the ability to pivot over time. While some may want to vacation throughout the year, save for their children’s college fund or wipe debt out completely, all are significant and take sacrifice. What is the key to achieving such a pinnacle level of confidence? Time.

 

Be kind to yourself and understand mistakes should never be equated to failures. Your commitment to this financial journey will always be rewarded.

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Source: mint.intuit.com