| More than half of Americans are placing debt reduction as their top priority this year.
That’s according to a recent study from Northwester Mutual that explores Americans’ attitudes and behaviors toward money, financial decision making and broader issues impacting people’s long-term financial security.
Though the majority of Americans (53 percent) cited debt reduction as their top 2018 financial priority, average personal debt (exclusive of home mortgages and among those with some debt) climbed higher this year, exceeding $38,000 compared to just over $37,000 in 2017.
Additional new findings from Northwestern Mutual’s study further suggest that Americans are digging further into debt:
- Americans are twice as likely to have accumulated $5,000 to$25,000 in debt (33 percent) rather than personal savings (17 percent)
- Fewer people said they carry “no debt” this year compared to 2017 (23 percent vs. 27 percent)
- Two in 10 people allocate a staggering 50 percent to 100 percent of their income towards debt repayment
- One in 10 (13 percent) Americans say they will be in debt for the rest of their lives
Notably, this year, credit cards tied mortgages as the leading source of debt, spiking from 19 percent to 25 percent. Educational loans (6 percent; 28 percent for Millennials ages 18 to 24) and car loans (7 percent) rounded out the top three.
Anatomy of Debt
The cycle of “buy and borrow” continued this year. After covering off on basic necessities, Americans allocated nearly equal amounts of their monthly income to debt repayment and discretionary expenses (an average 36 percent and 37 percent, respectively).
Looking closer at the nature of discretionary spending, dining and nightlife emerged as the top category (15 percent). Other mentions included:
- Personal passions/hobbies: 13 percent
- Personal care: 13 percent
- Clothing: 13 percent
- Leisure travel: 10 percent
Interestingly, the data suggests that, in succumbing to their urge to splurge, Americans may be underplaying the implications of debt on financial health. In fact, the majority (56 percent) said that debt has “low” or “no impact” on their ability to achieve financial security.
