Debt in America

There is almost $800 billion in credit card debt in the U.S., meaning the average person with credit card debt owes almost $17,000.

That seems a lot, but the fact is that it’s nowhere near the most debt most Americans are in.

There is over a $1 trillion in auto loan debt, meaning an average of almost $30,000.

There is almost $1.5 trillion in student load debt, meaning an average of over $50,000.

There is almost $9 trillion in mortgage debt, meaning an average of over $180,000.

There is almost $13 trillion in general debt, meaning an average of almost $140,000.

Of course, as we can see above, most of the general debt is mortgage debt, and not everyone has a mortgage.

Of course, all of this is accumulating interest, and most debt payments are going toward interest rather than principle. A mortgage of $180,000 is going to be in the area of $800/month, not counting property taxes which can have a very wide range, but can be as high as 50% of your mortgage payment. That can mean a mortgage of around $1200/month. Your student loans can be around $300/month. Your auto payment will be around that, too. That’s around $1800/month in debt-related bills. And don’t forget credit card bills, with their extremely high interest rates. That can be around $200/month more. If you are making $50,000/yr, you are bringing home around $3000/month (depending on state income taxes). That means $1000 for water, electricity, cable, internet, cell phone, and in some places, gas.

Who needs to eat, anyway?

To live this life, you would need at least two people making around $75,000/year between them. And if you want to have any savings or money to invest, much more than that.

This level of debt has the effect of ensuring people don’t take a great many financial risks. Better to get a job from an already-established business than to start your own. While it’s true that most entrepreneurs are not dissuaded by such financial problems, there are a marginal number of people who are, and those people afraid to take chances build up over time, stagnating the economy more and more as businesses aren’t created.

Debt has the effect of keeping people from taking as many risks as they would. There are fewer businesses, less art, fewer technological advances because people are in debt and see no way out.

At the same time, those who don’t have debt are also the people who cannot get any sort of loan because they have no money. But how much money do you really have if most of your money goes to paying your debts?

 

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