Running up $50,000 in credit card debt is not impossible. About two million Americans do it every year. Paying off that bill?
Rising feelings of financial insecurity: Just 1 in 4 (25%) Americans say they are completely financially secure, down from 28% in 2023.
According to Experian, average total consumer household debt in 2023 is $104,215. That's up 11% from 2020, when average total consumer debt was $92,727.
Yes, it is possible to go through life without incurring debt, but it often requires careful financial planning and discipline. Here are some key strategies that can help achieve this: Budgeting: Create and stick to a budget to manage expenses and ensure you live within your means.
The Standard Route is what credit companies and lenders recommend. If this is the graduate's choice, he or she will be debt free around the age of 58. It will take a total of 36 years to complete. It's a whole lot of time but it's the standard for a lot of people.
Debt is simply money that you bought, and the price of the money is the interest or whatever other fees you're paying to buy the money. That's all it is. And one of the things I say about debt is that paying off debt doesn't make you rich. Meaning that once you pay off the debt, you don't start making money from it.
Here's the average debt balances by age group: Gen Z (ages 18 to 23): $9,593. Millennials (ages 24 to 39): $78,396. Gen X (ages 40 to 55): $135,841.
The Gen X debt situation
The cohort also has the largest share of people with debt, nearly 99% carry some type of balance, LendingTree found. Gen Xers led the way in three of the four categories analyzed. The group — between 44 and 59 years old — has the highest median credit card, auto loan and student loan balances.
In a recent NerdWallet survey, 57% of Americans said they were living paycheck to paycheck.
That said, the typical age of financial independence should be between 20-23 years old, according to a Bankrate survey. Break the numbers down by cost category, and differences of opinion can be pretty wide.
The average American requires a much larger income to live comfortably, the report found. Currently, the average full-time worker makes about $79,000, according to the U.S. Census Bureau. Meanwhile the survey found the average American needs an income of $186,000 to live comfortably.
At the close of 2019, the average household had a credit card debt of $7,499. During the first quarter of 2021, it dropped to $6,209. In 2022, credit card debt rose again to $7,951 and has increased linearly. In 2023, it reached $8,599 — $75 shy of the 2024 average.
According to the Federal Reserve's Survey of Consumer Finances (SCF) for 2022 (the most recent study released publicly), the average savings balance for people ages 64 and younger ranged from $20,540 to $72,520, with median balances ranging from $5,400 to $8,700.
"Shark Tank" investor Kevin O'Leary has said the ideal age to be debt-free is 45, especially if you want to retire by age 60. Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued.
Most Americans are not saving enough for retirement. According to the survey, only 14% of Americans have $100,000 or more saved in their retirement accounts. In fact, about 78% of Americans have $50,000 or less saved for retirement.
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
The $1,000 per month rule is a guideline to estimate retirement savings based on your desired monthly income. For every $240,000 you set aside, you can receive $1,000 a month if you withdraw 5% each year. This simple rule is a good starting point, but you should consider factors like inflation for long-term planning.
While the answer varies for each individual, it often pays to strike a balance between the two. Building up a savings account helps ensure you'll be able to afford emergency expenses without going further into debt.
Debt and Happiness
Those who reported feeling happier in retirement had one big reason why: No debt. About 62 percent of retirees who said they were “much happier” in retirement also said they had paid off all of their debt before retiring.
Wealthy family borrows against its assets' growing value and uses the newly available cash to live off or invest in other assets, like rental properties. The family does NOT owe taxes on its asset-leveraged loans because the government doesn't tax borrowed money.