With so Much Debt, Financial Planning Can Help

breaking free

A recent survey from the American Institute of CPAs about the anxiety-producing debt load facing Americans is replete with head-scratching details. But the upshot is this: It seems that a lot of people need financial planning.

For starters, when everyday expenses are the top debt for 44 percent of the respondents, you know things must be tough. That’s followed by mortgage payments (41 percent), insufficient income (36 percent), car payments (33 percent) and health care costs (32 percent).

Millennials, as it turns out, worry the most about their debt load. According to the Harris Poll of 1,004 U.S. adults, 73 percent of what is now the biggest generation in the country have debt. And 68 percent of millennials say debt has negatively affected their lives – compared to 48 percent of the boomers and 59 percent of GenXers – and they are twice as likely to worry about it.

The debt stress can cause trouble with a spouse or partner, and 31 percent say they worry in general about their debt while 25 percent worry at bedtime.

A third quarter report issued in November by the Federal Reserve Bank of New York digs a little deeper without the generational differences.

Here are the key takeaways:

  • Household debt rose in the third quarter for the 13th consecutive quarter and is now $280 billion higher than the peak of $12.68 trillion in the third quarter of 2008 – which, we’ll remind you, was during the so-called Great Recession. The total household debt as of Sept. 30 was $12.96 trillion. 
  • New mortgage debt of $479 billion was originated in the third quarter while mortgage delinquencies improved.
  • The approximate 70,000 foreclosure notations added to credit reports between July 1 and Sept. 30 was a new historical low.
  • Student loan debt increased to $1.36 trillion as of Sept. 30.
  • While 11.2 percent of aggregate student loan debt was at least 90 days delinquent or in default, delinquency rates likely understate the actual delinquencies because about half of student loans are in deferment, grace periods or forbearance. “This implies that among loans in the repayment cycle, delinquency rates are roughly twice as high,” the Fed report states.
  • Auto loan balances rose by $23 billion while delinquencies increased slightly.
  • Credit card balances rose by $24 billion.
  • Credit inquiries rose in the six months prior to the third-quarter report, indicating that consumer credit demand rose in the third quarter.

“For Americans watching their debt levels rise while they struggle to make monthly payments, the situation can feel hopeless and have a serious impact on their quality of life,” said Greg Anton, CPA and chair of the AICPA’s National CPA Financial Literacy Commission. “The good news is, people don’t need to be held hostage by debt. Establishing a plan to live debt free in the future will help reduce your anxiety today.”

Back to that need for financial planning, here’s what the AICPA recommends: Use apps and other tech tools to track spending; prioritize spending; getting credit scores will help people determine their financial standing; and analyze cash flow.

About Terry Sheridan

Terry Sheridan

Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.


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