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Will Rising Household Debt Keep Pace With Income?

September 21st, 2012 · No Comments · Budgeting, Economy

by Credit Info Center

(Last Updated On: September 21, 2012)

As I blogged yesterday, new data suggests the U.S. economy has finally bottomed out, implying things can only get better. But along with the list of positive signs of economic recovery listed in that post, note the list of key indicators that are still falling short. In the falling short department, it looks like another should be taken into consideration: household debt.

In the second quarter of 2012, Americans increased their debt by $39.4 billion. As reported by Yahoo News, this is the first such increase in over a year, bringing U.S. combined household debt to $13 trillion.

Now, considering that consumer spending represents 70 percent of U.S. economic activity, an increase in household debt should paint a rosy economic outlook. After all, the more we’re borrowing, the more we’re spending. But it begs the question: Do we have the income to back it up? Or are we charging up debt we’ll end up defaulting on down the line?

Median U.S. household income fell 1.5 percent in 2011. It’s basic math. If we’re borrowing more but making less, we could be headed for trouble.

What about you?

How has your income been affected since the Great Recession? How did it affect your borrowing and spending habits? And now that there are signs we are headed for a real recovery, how may your borrowing and spending habits change in the near and long-term future?

Even in the best of economic times, it’s best to budget on the conservative side of things (i.e., save more, spend less). We have a number of articles here at that can help you stay focused on just that, including:

  • Seven Tips to Makeover Your Personal Finances
  • Top Five Ways Americans Waste Money
  • 5 Frugal Living Tips for Shopaholics
  • Strategies For Financing Your Child’s Education
  • Eight Steps to Calculate How Much You Need to Retire

Find these and more in our comprehensive collection of articles on budgeting.

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