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How much do we owe?

July 24, 2011 Leave a comment

I had looked at how much stock we own as an average American family, so, next I wondered how much do we owe in debt?  Again the Federal Reserve keeps a pretty good tab on how much in debt everyone is and how much we are borrowing or saving every year.    As of the 1st quarter 2011, all families had an outstanding personal debt of $13.3 Trillion dollars.  That works out to $139.000 (13.3 Trillion debt / 95.6 Familiies) for every family.  Of this debt, 75% is house mortgages and 25% is consumer credit.  So, the average family owes 3 times as much on the mortgage as they do all their other consumer debt combined (car loans, credit cards, other debt).   The total Wages and Rental income for people (i.e. not companies) was $9.2 Trillion dollars.  That is an average income per family of $96,700.  That means the debt to income ratio is 1.4 for every family.  So, it would take a year and a half of work, if you paid no taxes to pay off your debt.  How do you stack up?

This sure seems like a lot of debt.  But, a silver lining is we aren’t borrowing like we used to.  The following is a graph of the last few years for family borrowing.  As you can see the average family has negative debt the last couple of years which means we are saving more than we are borrowing.  We are paying down our debt.

This is certainly something to keep an eye on in the future.  This may be a combination of banks not lending like drunken sailors and them raising requirements for loans or it may because American families are just paying down their debt and doing more saving.  We have been averaging $270 Billion dollars a year in lowering our debt.  At that rate it will take “only” 49 years for families to pay back what we owe in personal debt.

So, we will always owe money it looks like.  This is to be expected as families buy homes, cars, etc and take loans to do this.  What about our government?  We all know that when the government owes money it means that we owe money because the government can only raise money through taxing us.  The National Debt for the US currently is $14.4 Trillion Dollars which works out to $150,000 per Family.  That means you owe more to pay back the National Debt than you do to pay back everything you owe in terms of your loans for homes, cars, personal debt, etc.  Makes the idea of a balanced budget amendment a lot more appealing.  Of this $14.4 Trillion about $9.4 Trillion dollars is owed in the general credit market.  So, how does the trend look for the government?  Are they starting to pay down their debt like Families are doing?

Well, it looks like the Government isn’t paying down the debt.  I know this was a trick question, as the government obviously borrowed more because of the latest economic stimulus packages to try and soften the recession.  I guess a government spin would be that they are not borrowing at the same accelerated rate in 2011 as they did in 2008, 2009 and 2010, but, I don’t know if that is something to get too excited about.

In summary, if we combine our personal debt with the debt the Government has so kindly saddled us with it looks like we owe nearly $300,000 in debt.  I know how excited that makes me!

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Categories: Debt