may-2017

10-11 / 204

10 11
opening lines
Americans Besieged by Debt: 4 in 10 Spend Up to
50% of Monthly Income on Debt Payments
Nearly three quarters of Americans are
struggling with debt and the burden
is significant in terms of both size
and duration, according to new findings from
Northwestern Mutual’s 2017 Planning &
Progress Study. Specifically:
n Of those Americans with debt, 4 in 10
(45%) spend up to half of their monthly in-
come on debt repayment.
n Nearly half of Americans (47%) are carry-
ing at least $25,000 in debt, with average
debt of $37,000, excluding mortgage pay-
ments. Notably, more than 1 in 10 say
their debt exceeds a staggering $100,000.
n More than one third (36%) said they will
be in debt between 6 and 20 years while
14% expect to be in debt for the rest of
their lives.
n When looking at the sources of debt, sim-
ilar to 2016, mortgages (29%), credit card
bills (19%), and personal educational loans
(7% gen. pop. and 23% for Millennials)
topped the list.
“Building financial security while saddled
with high debt is like running a race with
a weight around your ankle,” said Rebekah
Barsch, Vice President of Planning for North-
western Mutual. “Reducing debt accumulation
and being proactive about strategically man-
aging the debt you already have is integral to
a sound financial plan.”
The research released is part of the 2017
NorthwesternMutual’s Planning&Progress Study
annual research project exploringAmericans’atti-
tudesandbehaviors towardfinancesandplanning.
TheStudylaunchedearlier thismonthwitha lookat
the current state of financial optimism.
The true cost of debt
Not surprisingly, debt emerged as a significant
source of stress and pressure:
n 4 in 10 Americans said debt has a
“substantial”or “moderate” impact on finan-
cial security and the same number consider
it a “high”or “moderate” source of anxiety.
n Eliminating all debt (26%) and earning
significantlymore income (29%) had the
most mentions when asked what changes
would most positively affect people’s finan-
cial situations.
n When asked how they would use a $2000
windfall, 40% said they’d pay down debt.
Despite recognizing the downsides of debt,
the lure of spending remains strong. After cov-
ering off on necessities, Americans said 40%
of their monthly income goes toward discretion-
ary spending on entertainment,leisure travel,hob-
bies fact,when askedwhat financial
pitfalls theyare prone to,one quarter of Americans
flagged“excessive/frivolous”spending.
“One of the hardest challenges is resisting
the urge to splurge on items that are beyond
our budget,” said Barsch. “While giving into
temptation can feel good in the short-term, it
often contributes to an ongoing cycle of buy
and borrow that can become hard to escape.”
To pay or not to pay…
a question for some
The findings revealed that, among those
managing debt, there is no clear consensus on
the best strategy for repayment:
n “I pay as much as I can on each of my
debts each month” (35%).
n “I pay off debts with the highest interest
first and make minimum payments to oth-
ers” (19%).
n “I pay what I can when I can” (18% gen
pop - 25% Millennials).
n “I make minimum monthly payments to
each creditor” (17%).
“A thoughtful approach to debt repayment
that minimizes interest and safeguards credit
is essential,” noted Barsch. “Otherwise, you risk
building your financial foundation on a house
of cards - literally.”