I firmly believe that debt is the greatest risk that consumers, businesses and governments face right now. From my viewpoint all three groups are overextend but it hasn’t stopped them. They keep racking up more and more debt while seemingly oblivious to the consequences. I’ve written a lot of articles about debt and today I have another one for you. At the end of the day, the increase in debt doesn’t have to continue. It can stop today and it starts with you saying enough is enough.
US consumer debt is approaching a record 20% of GDP. Consumer debt is the non-mortgage debt such as student loans, auto loans and credit cards. This type of debt tends to have much higher interest rates. Which group in this country is shouldering the majority of the consumer debt burden?
The title of the blog post probably gave it away but it is the millennial generation. According to UBS millennials own $1.1 trillion of the countries $3.6 trillion in consumer debt. That is about 30% of the consumer debt load held by the youngest group of working age adults in our country. Skyrocketing college costs have no doubt contributed to this staggering figure.
UBS went on to say that their evidence lab survey found that 52% of the people most worried about defaulting on their loans was individuals from the millennial generation. Many in the generation entered the workforce before, during or right after the Great Recession. There were few jobs available and many had to take what they could get. Jobs that didn’t pay anywhere near what recent graduates were getting just a decade earlier.
Our country is dependent on consumer spending to grow. You already know that I think this is a bad thing to build an economy around but it is still the way it is. If the largest generation in our country is buried under a massive load of debt, the economic engine in our country could be stalled for years to come. There has been many explanations given as to why our economy isn’t growing as fast it normally does in a recovery period but debt is rarely brought up.
If your afraid that you could default at any moment on the debt that you already have, spending extra on big ticket items is not going to be at the front of you mind. Right now it is impossible to know what all the ramifications might be but the moral of the story was already listed in the first paragraph above. The only way for the debt engine to stop is by you and you alone saying enough is enough. You can’t control what others are doing but you can control your own behavior. Even if paying off your debt hurts the broader economy right now, our economy would be stronger for it in the decades to come.