One way to measure the health of an individual or household’s financial health is to look at the ratio of debt to savings. This is especially true with credit card debt, as the high-interest rates often mean the debt continues to grow even while some payments are being made. Savings, on the other hand, points to a certain capacity to weather financial problems, like unexpected medical expenses or other costs, which have not been planned for. Unfortunately, it seems that Americans are increasingly likely to have more high-interest debt than savings to cover such debt.
According to a study by personal finance company Bankrate.com, while just over half of Americans have more in emergency savings than they owe in credit card debt, the percentage of those in the opposite situation, that is, having more high-interest debt than savings, has risen. The study concluded this percentage rose two points to 24 over the past year.
The age cohorts most likely to be facing these poor debt to savings ratios were ‘Generation X’ and ‘Millennials.’ Further it was the ‘lower-middle’ income group, those making between 30 and 50 thousand dollars per year, who are most likely to be in this situation. This is likely because higher income levels tended to have more savings, while lower income levels generally had little or no credit card debt.
Large amounts of credit card debt can sneak up on a household for many reasons, whether it be for necessary emergency repairs to a home or vehicle, medical costs, or simply slowly rising living expenses without a commensurate rise in income. Those on Long Island who find themselves in a situation in which debt is becoming unmanageable may wish to consider consulting an experienced debt relief attorney, as options may be available to help them reestablish their financial well-being.
Source: Yahoo Finance, Americans Losing Ground in the Battle between Debt & Savings,” Feb. 22, 2017
