You’ve probably heard the saying “You have to spend money to make money.” Economists debate that, but there’s little doubt that people spend more when they’re making.
The median household income hit $79,900 in the first quarter of 2021, according to the U.S. Department of Housing and Urban Development. That’s almost $35,000 more than it was in 2000. (21 years later) But the typical American household now carries an average debt of $145,000. The median debt was only $50,971 in 2000.
The average American has $90,460 in debt, according to a 2021 CNBC report. That included all types of consumer debt products, from credit cards to personal loans, mortgages and student debt.
The average amount of debt by generation in 2020
- Gen Z (ages 18 to 23): $16,043
- Millennials (ages 24 to 39): $87,448
- Gen X (ages 40 to 55): $140,643
- Baby boomers (ages 56 to 74): $97,290
- Silent generation (ages 75 and above): $41,281
The debt to income ratio is a key indicator of financial health. It’s determined by taking your monthly expenditures and dividing that number by your monthly income.
For instance, if your bills amount to $5,000 a month and you make $7,500 a month, your DTI is 66%. It also means you are dire need of financial overhaul. The maximum DTI you can have to qualify for a mortgage is usually 43%. Most financial advisors recommend keeping your DTI at 30% or lower.
By the way, the New US median home price: $427,037 and rising!
Quote from Mike Tyson: “Everyone has a plan until they get punched in the mouth”
Because most people do not want to be punched in the mouth. It is a shocking experience and one that can kill anyone’s confidence. The example above is a punch in the mouth. It is also an unwanted burden that is restrictive. Most people dream of having the lifestyle that they are proud of and have worked for. But, spending more money, that is above your income is a punch in the mouth waiting to happen.
The definition of Freedom is: “The power or right to act, speak, or think as one wants without hindrance or restraint. Privilege, Prerogative, Independence, Self-determination, Liberty from slavery or from the power of another.”
The definition of debt is the exact opposite. The indebt person has literally given their power over to another be it; the government, creditors, mortgage companies, etc.
In addition to the freedom that a debt free life would provide, what if you could simultaneously be lowering your debt and build your wealth at the same time? What if you could build wealth risk free and tax free at the same time?
On a scale from 1-10, how would your key indicator of financial health be then?
For your free debt action plan analysis contact:
Kimberly Clifford
AZ Credit Medix Debt & Wealth Coach
(888) 959-8893
Sources:
1. Cox, J. (2021, February 17) Household debt rises to $14.6 trillion due to record-breaking rise in mortgage loans. Retrieved from
https://www.cnbc.com/2021/02/17/household-debt-rises-to-14point6-trillion-due-to-record-breaking-rise-in-mortgage-loans.html
2. US Debt clock.org (US debt is now over $29 Trillion)
