New Data About Household Debt. Should You Be Concerned?
, by Rob Kaufman
The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks in the U.S. and plays a primary role in monetary policy, financial supervision and the country's payment system. Now that you know what it is and what it does, let's get to the recent data the Center for Microeconomic Data reported regarding household debt.
Overall, the numbers show that total household debt increased by $124 billion in the first quarter of 2019 - the 19th consecutive quarter with an increase. That makes the total household debt $13.67 trillion. Yes, that reads "trillion".
Some of this stems from the increased delinquency rate of credit card balances - a trend that appears to coincide with an increase in younger borrowers entering the credit card market. Although the delinquency rates are still below pre-financial crisis levels, the rise can still be considered alarming.
The Debt Trends Within Different Loan Categories
The data from the report (gathered by the New York Fed's Consumer Credit Panel), show different debt trends within a few loan categories.
Mortgage balances rose by $120 billion, to $ 9.2 trillion
Mortgage delinquencies (90 days or more) decreased from 1.1% to 1%
Outstanding student loan debt increased by $29 billion, to $1.49 trillion
New auto loans increase to $139 billion, part of a continuing growth trend
Credit card balances fell from $870 billion to $848 billion
- The credit report of approximately 192,000 consumers had a notation of bankruptcy added - pretty much the same as the first quarter of 2018.
- Credit inquiries can be an indicator of consumer credit demand. This number decreased in the past six months to around 137 million - the lowest level in the history of gathering this data.
What These Numbers Mean to You
Debt can be good or bad, depending on both your amount of debt and individual circumstances. The numbers in the report show that Americans are carrying a lot of debt and most of this debt appears to be increasing.
Other than the fact that too much consumer debt can lead to a potential economic downturn, these numbers might have little effect on you if you don't have any debt.
However, if you do have debt, this data could mean a bit more because you might see yourself as part of the rising debt crisis and aren't sure how to help solve the problem. If this is an issue for you, here are some quick tips to help you decrease your debt:
- Add up debt. This might sound obvious, but it's critical to know exactly how much debt you owe to get rid of it. Write down your debts, how much is owed, the interest rate for each debt and the minimum payment due. Once you have that info, you can decide whether it's best to start paying the debt with the smallest balance (regardless of interest rate) or paying the one with the highest interest rate (regardless of debt size). Do the numbers, then make your decision.
- Create a budget. Make certain you know your income versus expenses. This might also sound obvious, but although many people know their income, expenses can vary and knowing that variation is key to a budget's success. Once you determine true income and expenses, decide how and where you're going to cut down on money going out each month.
- Use your cards wisely. If credit card debt is the biggest culprit, it might be a good idea to stop using your cards and pay with cash or a debit card. This will both stop you from adding to your credit card debt while also helping you reset your spending mindset.
- Trim Monthly Expenses. Do you need all those cable TV channels or that daily Frappuccino? Does the thermostat have be set so high in the winter and so low in the summer? Look at the things you pay for on a monthly basis and see where and how you can cut the cost (or in the case of cable TV - cut the cord).