Cost of debt
According to statistics the average US household is paying almost $7000 in interest a year and in most cases this represents almost 10% of the average household income which is estimated to be just over $75,000. That is a large chunk of money out of your available income. Interest is simply making the pressure which has to be dealt with by US citizens that much heavier. The question is why there is such a drastic increase in debt and it may also be interesting to determine why consumers and lenders report totally different debt amounts especially when it comes to credit card balances. Probably every lower and middle-class US home has struggled with some form of debt at one point in their lives. This could have been motor vehicle debt, student debt, credit card debt and a wide variety of other personal types of debt. Although there are differing circumstances there are still economists who maintain that with a tight budget and by exerting financial discipline and a measure of sacrifice it is possible to deal with most kinds of debts. This will be an ongoing struggle especially if there are lots debts which will require the consumer’s attention. A lot of education still has to be done in the US before consumers will have a better understanding of debt and all of the related issues and only then will progress be made relating to these serious issues.
Is the high cost of US living to be blamed for rising debt?
Statistics show that household income has grown by a mere 26% over the last decade but the actual cost of living has increased by 29% in the same period. However, there are other expenses such as those applying to housing and food costs and also medical care which has literally gone through the roof and especially medical costs have increased by over 50% during the same period. There are many US citizens who are now considering the consolidation of credit card debts in a desperate attempt to regain some control over their finances. There is a very simple formula which applies to the US consumer and that is when the cost of living is significantly higher than the growth of income then this unavoidably results is increased debt. There are many who are still maintaining that US consumers is not practicing adequate levels of financial management. Doing so is simply not accurate because the US has just come through a serious recession which has changed the picture for the US consumer considerably. Healthcare technologies is on top of the list when it comes to the most profitable industries in the US today. Is it right for US companies to profit from others people’s misfortune such as chronic illness and other healthcare needs?
What about the rest of the debt picture?
According to statistics, there are only three of the major spending categories which has not been growing faster than household income. These is transportation, apparel and recreation. This could be misleading because according to expert’s recreation and apparel is to some extent immaterial expenses which typically do not make up a large portion of most consumers budgets. The fact remains that over the last decade there has been a serious increase in the cost of living in the US but this problem is a lot more serious when it comes to those unfortunate US citizens who are suffering from chronic health problems or who are finding themselves in a city with a high cost of living. Then there are also those who are currently studying and to has to deal with the expenses related to education. The fact of the matter remains that it is significantly more difficult for US citizens to maintain the standard of living of the early 2000’s.