American Debtor

In a recent article from the New York Times the author stated, “It’s one of the toughest lessons an investor has to learn: while the value of assets can plummet posthaste, it takes forever to shrink the debt that was used to buy them.” Even as housing prices continue to fall and U6 unemployment holds at around 16%, American consumer debt remains stubbornly high. It isn’t that we are not trying, the Federal Reserve reports that while consumer debt has only dropped 6.5% from its peak in 2008, the number of credit card accounts has dropped by 23.2%.

As a people we are beginning to get the message, but for some it is too late. More statistics from the Federal Reserve Bank from the aforementioned article: During the months of April, May, and June half a million people had a foreclosure added to their credit report. Also the number of bankruptcies reported in the second quarter jumped 34% to 621,000.

Per Capita Debt Balances for an Average Consumer with a Credit Report

California $78,000
Nevada $73,000
Nationwide $49,000

Really! These are the numbers reported by the Federal Reserve. How can you tell if you are part of the problem or part of the solution? I have posted lists of the warning signs of financial trouble from time to time. This one comes courtesy of my Employee Assistance Program at work.

You are borrowing to meet regular expenses, such as food and utility bills.

You are barely able to make the minimum required payment on bills, but continue to charge.

You are using one form of credit, such as a credit card or a debt consolidation loan, to make payments on other debt.

You are using 20% or more of your take home income to pay credit card bills and personal loans (excluding mortgage payments).

Your revolving credit cards are charge to the limit.

You are behind on credit card payments and receiving calls from creditors or collection agencies.

You are bouncing checks.

You have no cash reserve.

If any of these indicators apply to you, get help now. Perhaps something as simple as a budget will help. Perhaps more serious debt counseling will be required, but don’t wait for a miracle. Do something today.