{"id":26230,"date":"2016-08-10T01:10:20","date_gmt":"2016-08-10T08:10:20","guid":{"rendered":"http:\/\/www.clairewolfe.com\/blog\/?p=26230"},"modified":"2016-08-10T04:58:39","modified_gmt":"2016-08-10T11:58:39","slug":"debt-and-preparedness","status":"publish","type":"post","link":"https:\/\/www.clairewolfe.com\/blog\/2016\/08\/10\/debt-and-preparedness\/","title":{"rendered":"Debt and preparedness, Part I"},"content":{"rendered":"

The New York Fed recently announced that U.S. household debt has ticked up again<\/a>. Small percentages but still big numbers. More worrisome is the type of debt responsible for the increase:<\/p>\n

Household debt \u2014 which includes things as varied as mortgages and credit cards \u2014 increased to $12.29 trillion in the second quarter of 2016, an increase of $35 billion, or 0.3%, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit.<\/p>\n

“Overall household debt remains 3.1% below its 2008 Q3 peak of $12.68 trillion, but is now 10.2% above the 2013Q2 trough,” the report said.<\/p>\n

The biggest increases came from auto debt and credit-card debt, which ticked up by $32 billion and $17 billion.<\/p><\/blockquote>\n

Mortgage debt actually decreased. While student loan debt didn’t go anywhere, a look at the Business Insider<\/i> chart confirms all the talk: it’s a long-term troublespot.<\/p>\n

\"us-debt-8-9-16-cotd\"<\/p>\n

In theory (though painful experience says it ain’t necessarily so), mortgages and student loans are “good” debt — investments in the future. Credit card debt and auto loans are “bad” debt — debt on assets that have already depreciated or non-assets (like vacations, weddings, and nights out on the town) that have disappeared altogether. <\/p>\n

Of course, whether debts are “good” or “bad” is subjective. Some of us here would consider even modest mortgage debt a curse, while you’ll find people on various credit forums who claim bragging rights for owing $50,000 or $70,000 or more on a luxury car. Depends on your priorities, your income, your personal wish-lists, your assets, your comfort with risk, your ability and willingness to repay, how the particular debt benefits or burdens you, and probably a thousand other factors.<\/p>\n

Something to worry about<\/strong><\/p>\n

One of the most worrisome things about the growing national household debt is that — shades of the pre-crash — a lot of it’s being run up by people who are least likely to pay it back. <\/p>\n

For years, subprime<\/a> and ridiculously long-term<\/a> auto loans for people with dubious credit have been a rumbling scandal, threatening to break through surface of the financial world. Now we learn that the largest uptick in credit card acquisition is by the borrowers with the lowest credit scores<\/a>.<\/p>\n

This might not mean much, since those are also the people most likely to have lost their cards in 2008 and beyond. Maybe they’re just recouping. The low-score cohort might also include some young people breaking into the credit world, who’ll use their new cards well and build better financial reputations for themselves. So far, there’s no renewed consumer debt panic. Default rates on credit cards aren’t skyrocketing. No reason to run screaming in the streets in alarm. So far.<\/p>\n

Nevertheless, the growth of “bad” debt, among the financially weak, in an economy that’s still staggering … well, that just can’t be a good sign<\/a>.<\/p>\n

All this got me to thinking that it’s time to revisit the question of debt among We the (More-or-Less) Prepared. Are any of us slipping into the debt trap? Everybody who’s been there knows how much easier it is to get in than out. Are we doing okay but maybe need a personal financial tune-up? Have we come up with brilliantly workable strategies for staying out of debt and building up durable assets? How will any problematic indebtedness of our friends, relatives, and neighbors affect us if (when) things go south again?<\/p>\n

It’s not a new subject hereabouts, but it’s one we haven’t touched on in a while. I’d like to come back to that in Part II, probably a bit later this week.<\/p>\n","protected":false},"excerpt":{"rendered":"

The New York Fed recently announced that U.S. household debt has ticked up again. Small percentages but still big numbers. More worrisome is the type of debt responsible for the increase: Household debt \u2014 which includes things as varied as mortgages and credit cards \u2014 increased to $12.29 trillion in the second quarter of 2016, an increase of $35 billion, or 0.3%, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit. “Overall household debt remains 3.1% below its 2008 Q3 peak of $12.68 trillion, but is now 10.2% above the 2013Q2 trough,” the…<\/p>\n

Continue readingDebt and preparedness, Part I<\/span><\/a><\/div>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20,27],"tags":[],"class_list":["post-26230","post","type-post","status-publish","format-standard","hentry","category-money","category-preparedness","ratio-natural","entry"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.clairewolfe.com\/blog\/wp-json\/wp\/v2\/posts\/26230","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.clairewolfe.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.clairewolfe.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.clairewolfe.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.clairewolfe.com\/blog\/wp-json\/wp\/v2\/comments?post=26230"}],"version-history":[{"count":18,"href":"https:\/\/www.clairewolfe.com\/blog\/wp-json\/wp\/v2\/posts\/26230\/revisions"}],"predecessor-version":[{"id":26260,"href":"https:\/\/www.clairewolfe.com\/blog\/wp-json\/wp\/v2\/posts\/26230\/revisions\/26260"}],"wp:attachment":[{"href":"https:\/\/www.clairewolfe.com\/blog\/wp-json\/wp\/v2\/media?parent=26230"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.clairewolfe.com\/blog\/wp-json\/wp\/v2\/categories?post=26230"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.clairewolfe.com\/blog\/wp-json\/wp\/v2\/tags?post=26230"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}