Tuesday, March 11, 2008

Everyone’s in Debt? Really?

Last Wednesday I rode back from the Hockey Game with two co-workers who I used to work in the same department with until I was transferred to Valdosta (I’ll be back working in the same department with them once I move back to Atlanta in April). One, we’ll call Baby Daddy*, is in a comparable position as I am but a few years older, the other, we’ll call Cyclist is a few decades older and is two positions higher than Baby Daddy and myself.

* Just to clarify – I named him Baby Daddy because his wife just gave birth two months ago to a beautiful baby boy. Not because he’s some deadbeat or anything.

So the three of us are riding back together, gossiping about work stuff and catching me up on all the happenings I’ve been missing while working out of town. Somehow we got away from the work gossip and on to the topic of how compared to a lot of people we were all better off – and we weren’t talking about just financially. Cyclist was talking about having an amazing wife, Baby Daddy was talking about the new baby and being a first time Daddy. Eventually we worked our way around to finances – we agreed we were lucky to have good jobs, a stable company, opportunities for advancement, and a good 401k plan. Then Baby Daddy asked if we’d ever seen CNBC’s the Millionaire Inside. Of course I have – I’m really into financial stuff, but Cyclist had not, since he doesn’t have cable so Baby Daddy explained the show to Cyclist – “People who are seriously in debt come on the show and experts try to help them change and become financially successful”. Baby Daddy talked about how seeing these people who are millions of dollars in debt makes him feel better about his lack of substantial savings. We all start going on and on about how horrible it must be to be that far in debt and I talked about how I have a really hard time relating to how you can get to that point of debt problems (in the millions people) and not realize there’s a problem and make a change. Cyclist agreed with me and added that even if you get into a thousand dollars of debt you’ve got to realize there’s a problem and do something to fix it. “So neither one of you is in debt?” Baby Daddy wanted to know. We both said no, I have no debt and Cyclist has none and even has his house paid off. Baby Daddy couldn’t believe this, and said we must be the only two people in the country who’s not in debt. This made me start thinking about if debt was the norm rather than the exception.

I further started thinking about this after a comment my mom made to me. On Saturday we were walking at the park and she was talking about her money woes and how she just can’t seem to make it all work. I love my mama and was sympathetic to her plight but seriously it’s the choices she makes for examples she has a $200 cable bill but claims she can’t find anything on TV to watch – but I digress the post isn’t about her money choices. At the end of her complaints she shrugged her shoulders and said “I guess everyone’s in debt”.

Baby Daddy and my Mom both think everyone’s in debt. Is everyone in debt, are Cyclist and I the only ones not in debt?

I know we hear statistics all of them about the average savings is negative and how the average non-mortgage debt per household is about $14,500 . But does that really reflect the typical lifestyle in America or is this just a perception that helps to promote more debt? I started thinking about what the median debt and savings could be. With an average you’ve got extreme lows and extreme highs, but the median would tell you what most people are doing. I just can’t imagine that more than half of the population is in debt (other than mortgages). I mean how are these people going to retire, how are the current retires living if not off of savings, what’s going to happen to this economy if the majority of people are in debt? It could be my perspective, and its not like people tell you they are in debt but if I quickly count up in my friends circle the couples or individuals (those who are not married) who I think have savings even if its not substantial but at least they are in the black, and that’s about 12 married couples/single people compared to about 3 couples/people that I’m fairly certain do not have any savings. Hmmm…at least in my friend group I’d say that the majority of American’s are not in debt, but then again my little survey was not scientific in the least.

What do you think, do think the majority of Americans are in debt?


Heidi at BankerGirl said...

People that have a lot of debt are always surprised to hear that they are in the statistical minority. I read somewhere that 30% of households carry revolving credit card debt - and that the average american's credit card balance is $7000 - which means that the 30% of the population that's carrying credit card debt has much more than just $7000 (oh the beauty of statistics).

I would say that about half of Americans have debt in addition to their mortgages - especially when count vehicle leases as debt.

Mom said...

I think more than half of Americans have debt outside of their mortgage. Especially if you are counting car debt.

No Debt Plan said...

I would guess more than 1/2 are in debt, especially when you consider vehicles. Definitely. I'd peg it at 75% or so. I would say that there may be a large amount of savings in a few people (the ultra rich) that is keeping the savings rate from looking extremely low.

"Future Millionaire" said...

I appreciate you all weighing in, I guess my perception is warped.

If you remove the car loan element - What would you say the percentage of American's with debt other than mortgages or cars loans?

Trees Full of Money said...

The majority of Americans have debt outside of their mortgages. When I was paying off my non mortgage debt, everyone I talked to about it couldn't understand why we would do such a thing. I would estimate that AT LEAST 4 out of every 5 adults had some sort of outstanding non-mortgage debt, credit cards, student loans, car loans, unpaid medical bills, ect.

What surprises me is people who don't even consider a car loan as debt. "Everybody has a car loan" they'll say!

Not Me!

Madeline said...

Interesting question. For me and my circle of friends (early to mid 20s), most of us are debt free and good with finances (already planning for retirement, saving in general). But I've always felt that we were in the minority as for a lot of people I know, car loans and credit card debt is the norm.

BK Brian said...

well i think where you live has a substantial effect on how much you can save - i know about half my friends have savings and half are in the hole - i'm looking to move from the latter to the former group and it takes time, esp to change your mindset - but having a child is expensive so i'm not too surprised he's in debt.....

Living Almost Large said...

Majority of my friends have student loans. Sigh we do too. Unfortunately it's more common now than ever.

None of my friends have CC debt, etc. But student loans are the bane of our existance. Many want to law, business, medical school and six figure loans are the norm! Per person!

Diana said...

I think it depends a lot on age, area where you live, whether or not you have a family... If we take out cars and homes, I think most people have some kind of debt, even if it is just a few hundreds in their credit cards.

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