Debt has been more important to manage than ever before. The Wall Street Journal reports that families are falling deeper and deeper into debt just to stay afloat in a middle-class lifestyle.
Here is the current debt breakdown in the US:
Mortgages have skyrocketed to 4 Trillion Dollars, Student Loans & Auto Debt total 1.3 Trillion Dollars each.
At the moment, debt is a good thing. The economy is strong, and consumer confidence is looking bright. However, there is an underlying negative. Subprime loans are back, disguised this time as unsecured personal loans to try and reach the highest loan volume as possible. And this red flag right here should scream MARKET CRASH!
Here’s the thing, our debt is manageable so long as job growth continues to drive the market forward. So long as new jobs are being created, this debt is manageable. But, as soon as we hit a turn in the market, and layoffs begin, the tower of debt will inevitably collapse.
The market has unfortunately been unfair in regards to debt management, inflation, and wage growth. While wages have nominally remained the same when adjusted for inflation, housing costs & tuition costs have skyrocketed well past the means of affordability. Most adults nowadays find themselves swimming in debt well above their means due to the aforementioned.
The system has changed, but has in affect, remained mostly the same. Rather than subprime loans being used by lenders to allow people to buy second and third homes that are above their affordability, lenders are now handing out very similar loans to those simply trying to stay afloat.
Only time will tell when this crash occurs and the strength of its impact.
For more information about the housing market, continue to follow my blog.
For information about debt, check out these two articles from the Wall Street Journal.