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Let’s be real; it’s not difficult to acquire some debt in your life. From credit cards to student loans, the average American owes money in some way or another. One of the best ways to understand your financial state is to compare it with others who are in a similar position.
That’s what this guide is for. We’ll take a look at the average American debt amount, break down where it comes from and offer some tips for managing your own finances.
Ready to learn more? Let’s get started.
Average American Debt By Age
The average American debt is around $90,460. This includes home equity, credit card debt, mortgages, personal, student and auto loans.
When it comes to different generations, there are some slight differences. Debt tends to peak somewhere around middle age but lowers once people reach retirement. For younger generations, the biggest source of debt is student loans.
Gen Z
Gen Zers, ages 18 to 23, hold around $16,043 in debt. Around $2,000 of that is credit card debt, which is one of the most dangerous kinds. The goal is to pay that off as quickly as possible so you avoid it going forward.
This is because credit card debt tends to have the highest interest rate of all. Credit card companies want their consumers to carry a balance. This makes it easier for them to charge high-interest rates.
Young people getting a credit card need to be careful and not spend more than they can pay back in full.
Millenials
The oldest Millenials turn 40 this year, and they tend to have higher debt than their younger counterparts. On average, they owe around $87,500.
Many of the members of this generation are becoming homeowners for the first time, and this leads to mortgage debt that can easily reach six figured. In addition to owning homes, millennials are also becoming parents, and raising a child can cost up to $233,610 for food, shelter, and other necessities.
If you’re looking to buy a home and start a family, you need to factor in all of the different expenses.
Gen X
Gen X has the highest average debt of any generation. Members range from 41 to 56. Many of them are sending their kids to college for the first time while carrying their own student loan debt.
It’s important to focus on tackling your own debt before worrying about paying for your child’s education. After all, they’re likely to receive some sort of financial aid. There isn’t a financial aid option for retirement.
Baby Boomers
Baby boomers have significantly less debt than Gen X. The oldest baby boomers are now 75 years old and have an average of $97,290 in debt.
Retirement should be the biggest focus for baby boomers. Instead of worrying about paying off your home, focus on saving.
Types Of Debt
Loans and credit increase Americans’ purchasing power. Having the ability to buy cars, homes, and other goods increases the quality of life for many who couldn’t afford them otherwise. Unfortunately, it also means more debt coming from different angles.
Let’s take a look at the most common types of debt.
Auto Loan Debt
Most people looking to purchase a car don’t have the cash available to pay for it immediately, so they take out an auto loan and pay the balance off over time. This is the second most popular type of credit, and about two-thirds of adults have an auto loan. Americans owe around $19,703 for car loans on average.
Student Loan Debt
The cost of higher education continues to rise, and the only way that many Americans can afford it is through student loans. The average balance for student loan debt was $38,792 in 2020. The payment suspension caused student loan delinquency rates to decrease, but it’s expected to increase in the next few years.
Mortgage Debt
The largest outstanding debt for Americans is mortgages. Around 44 percent of adults have this type of debt, and the balance stands at around $208,185.
When the mortgage interest rate dropped to a historic low in 2020, people around the nation bought homes. Although the interest rate is lower, there’s still a significant amount of mortgage debt.
Tackling Your Debt
The last thing you want to do if you have debt is to ignore it. Interest will add up, missed payments will lead to late fees, and your credit will tank.
What you need to do is make a list of everything you owe. Be sure to include the due dates, interest rates, and minimum monthly payments.
Now you want to go over your budget. Write down how much you earn each month and how much you spend on utilities, rent, groceries, and minimum debt payments. Using this information, see how much room you have to contribute to the debt.
To keep you on track, make a goal for when you want to pay off your debt. Even if it takes you a year or more, having a plan to reduce your debt and working towards it is sure to give you peace of mind.
If you need additional help tackling your debt, look here.
Take Control Of Your Finances
It’s no secret that financial stress is particularly tricky to manage. Dealing with debt can bring on a lot of anxiety and worry but don’t let it get you down. The first step to controlling your debt is looking at the facts.
The average American debt is around $90,500. It’s a combination of different loans and high-interest credit cards. Once you create a plan to tackle all of your debt, you’ll be on your way to financial stability.
Looking for more articles like this? Be sure to check out the Finance section of our blog!
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