Total US Debt is at an All Time High.. And Dave Ramsey is NOT Happy

Good morning,

Total household debt rose by $228Billion in the third quarter, over $17Trillion in total according to the New York Federal Reserve

As we continue to fight the war against inflation, the US consumer is taking on more and more debt to maintain his lifestyle. Americans paid $130Billion in interest and fees on their credit cards in the last year, which is the largest number ever recorded. Credit card debt is a viscous cycle. With 20% interest, no one is willingly putting purchases on their card that they don’t intend to quickly pay off. It’s an absolute death spiral at this point.

Who is the Resilient Consumer anyway?

We continue hearing about the “resilient consumer,” but how long can we sustain this? While the credit card numbers are bad enough, the average American is also taking on record debt in virtually every other category, from the obvious like mortgages (8% rates don’t help) to HELOCs, Student Loans, and car loans. We are starting to see an increase in delinquencies (nearly) across the board.

When faced with rampant inflation, the consumer has so far opted for debt spending to maintain a lifestyle over tightening the proverbial belt. Unfortunately, eventually credit runs dry and bills need to be repaid.

Inflation Rate Is Coming Down, Kind of

The Consumer Price Index report came out this morning, showing that the year-over-year inflation for October was at 3.2%, beating expectations. While this is the right track, remember that this is a compounding number, with 3.2% coming AFTER a massive 9% 1 year ago. In a way, even this win is a loss.

What Can we do?

With an uncertain outlook, rising prices, and an aggressive Federal Reserve, we need to keep things in a row. Decrease the spending, increase the ole emergency fund. You don’t want to find yourself in a spot where you have massive debt, large weekly expenses, and no job to help pay the bills, should the Fed’s Stated goal of raising Unemployment affect you. Better to have and not need than to need and not have.

Have a great week!

Ryan