I noticed this in the Wall Street Journal online today:
“Broad growth in borrowing over the summer months was the latest sign of consumer confidence as the U.S. economy enjoys the lowest unemployment rate in nearly 17 years. After years of deleveraging in the wake of the 2007-09 recession, household debt has risen more than 16% since the spring of 2013. Some 4.9% of outstanding debt was delinquent as of Sept. 30, ticking up from three months earlier. Late-payment rates, on the whole, remain low, but flows into delinquency have risen in recent years for credit-card and auto debt.”
From many perspectives, the economy is doing better. Friday’s unemployment report indicates we’ve reached a 17-year low, though the metric for unemployment has the inherent flaw of only counting those actively seeking full-time work. The number, however, is certainly better than if unemployment were rising. Here’s my concern: We have just completed a “successful” holiday shopping season with sales up 5% over last year. The story does not end here because now cometh the bills!
Consumer debt is on the rise – because the availability of credit has dramatically increased since 2013 and consumers are taking up the opportunity to spend on credit. So, what will you read about in February and March? My take is the Consumer Debt is more on the rise! To me, this is, “Here we go again.” The macroeconomists will talk about how good it is that consumer spending is on the rise because that means greater GDP, and more spending means more jobs. But if the growth is a result of middle America going further into debt, where will that leave us?
I’m the micro guy. I worry about Debbie, Bill, Ron, and Sarah – not GDP. If the economy grows, but Debbie and friends end up living without savings for retirement, a house refinanced and not paid for, and too much credit card debt, when Debbie and friends reach 70 and need to retire they won’t be able to live because the pittance of social security they receive will not cover their housing expenses, let alone the cost of food, transportation, and money to enjoy the last segment of their lives.
Add to this: we’re adding at least $1.4 trillion to our debt with our new tax laws (assuming we get the growth in GDP projected) and possibly much more (if we don’t see the growth projected). Who will bear the cost of the added interest burden on our debt? Interest rates will rise – which means the interest rates on consumer credit and bank fees, etc. – will end up skyrocketing. Beyond not having funds to retire with, the added costs will be borne by the consumers who are stuck in the scenario of carrying debt.
There is a solution for Debbie and her friends. They need to position themselves NOW – so they have no debt and are not bearing the cost of the economy’s expansion followed by the burdens of our national debt. The solution – is to act now and find out how to eliminate the debt and shift from “just getting by” to “saving for the future.”
The easiest way to learn how – is to attend our upcoming FREE Seminar on Wednesday, January 17th – “The Debt Fix is In for This Year” – Our focus is on you – your life and your future – the “micros that count!” Information to sign up is below.