A recent survey conducted by Northwestern Mutual has revealed some interesting insights about personal debt in America. According to the survey, the average amount of personal debt owed by Americans, excluding mortgages, is $21,800. Additionally, 35% of Americans with personal debt report that they are currently carrying close to or at their highest level of debt ever, while 43% say they are carrying close to or at their lowest level of debt ever.
The survey also identified credit card debt as the primary source of personal debt in America, accounting for more than double any other single source. Those with personal debt claim that 30% of their monthly income goes towards paying it off.
The survey found that the divide in personal debt is influenced by various factors, such as income, demographics, and individual money factors. For example, younger generations are more heavily burdened by student debt compared to older generations.
Christian Mitchell, chief customer officer at Northwestern Mutual, emphasizes the importance of proactive and intentional debt management, regardless of one's position on the debt spectrum. He encourages individuals to incorporate debt management into their long-term financial plans.
To better manage debt, Northwestern Mutual suggests several steps. First, individuals should give themselves a break and recognize that some of the debt they have accrued, such as student loans, may have been necessary for their current circumstances. Getting organized by understanding the amount owed, minimum payments, and interest rates is the next step. Prioritizing payback by focusing on debts with the highest interest rates can help expedite the process. Lowering interest rates through options like personal loans or balance transfers can also be beneficial. Additionally, finding extra money by cutting unnecessary expenses and considering side hustles can help pay down debt faster.
It is important to note that today's economic conditions, such as higher interest rates, can make it more challenging for borrowers to refinance or obtain new loans. However, having a well-rounded financial plan that addresses reducing debt, building emergency reserves, and investing for the future can lead to the best long-term results.
In conclusion, the Northwestern Mutual survey highlights the prevalence of personal debt in America and the need for individuals to actively manage their debt and incorporate it into their overall financial plans.