It seems that the consumer debt problem of Americans is far from being over. While the government is busy providing us with reports about how the job market is improving, the housing market is recovering and people are more confident about their finances. But while these may be true, it does not diminish the fact that our level of debt is still increasing.
Some economists say that the increasing debt amount is a positive indication for the economy. After all, nobody with shaky financial conditions will borrow money if they know it would be tough to pay it back. The only time that this will happen is through credit cards and that is because the consumer has no other choice. This was a popular scenario when the Great Recession happened. Consumers had to rely on their credit cards to help buy basic commodities because they did not have the cash on hand to make the purchase.
While things are not as bad as before, it cannot be said that we have fully recovered. In fact, a recent analysis from Experian provided us a glimpse of the debt situation in each city in the country. According to their report, Dallas leads among the cities with the highest debt level.
Dallas is first in the list of cities with the highest average debt
The data from this analysis can be seen in a press released published on Experian.com. This credit bureau released the latest study on Credit Trends and it ranked the different cities according to their average consumer debt.
The clear winner (or should we say loser), is the city of Dallas. According to the data, this city topped the list of the 20 major US cities. The city has an average of $28,240. This indicated a 7.8% increase in the debt amount since 2010. The city is also reported to have an average of 648 credit score – from a Vantage Score range of 300 to 850.
The city is closely followed Houston with a debt of $28,105 and the same average credit score of 648. The top 5 cities with the highest consume debt level is rounded up by Washington DC ($27,668 and credit score of 674), Seattle ($27,279 and credit score of 679), and Baltimore ($27,271 and credit score of 662).
The city with the least amount of debt, surprisingly, is Detroit. If you remember, this was the city that declared bankruptcy last year. The consumers in this city have an average debt of $23,604 and a credit score of 667. This city is reported to have decreased their debt level by 7.1% since 2010.
These findings give us a couple of insights about managing your credit and finances despite the economic condition of the city you are living in.
- The financial troubles of the economy in general make people more responsible in their credit accounts. Time.com pointed out that of all the cities, Detroit is the only one that decreased their borrowing. This might have been understandable as people got scared of the city’s financial situation. If you live in a city that just declared bankruptcy, you will not feel too confident about increasing your credit. Although your personal finances may seem strong, you will hold on to that and will not compromise it for fear that the economy around you will collapse.
- The high cost of living does not make consumers more prone to debt. The Time article pointed out that two of the most costly cities to live in, New York and Boston, place 4th and 5th when you rank the debt level from lowest to highest. Boston has a high credit score of 694 while New York have 678. That means living in a city that is known to have a high cost of living does not necessarily mean you will acquire a lot of debt.
- A low cost city does not mean you will not have a lot of debt. CreditDonkey.com gave a report about the most frugal cities in the country and guess who was included? Dallas and Houston. The two cities with the most amount of consumer debt rank 10th and 9th in the ranking of cities that has the most potential to make you live frugally. Dallas is reported to have a median monthly housing cost of $1,031 and the average yearly cost of daycare if at $8,323. In Houston, they almost have identical figures with $1,018 as the median housing cost and a daycare annual cost of $8,323. But despite these, the residents of these two cities have racked up the most amount of debt.
Experian revealed that the average consumer debt in the country grew by 5% since 2010. The credit bureau believes that this may not be so bad because banks who are willing to lend money is a sign that the economy is getting stronger. It also means consumers are getting more confident.
That should not be deemed as too bad right?
How to make debt payments easier to implement
It all depends on how you look at it. While economists view a higher consumer debt as a sign of a stronger economy, it does not bode well for the average American. Remember that the Great Recession was so bad because of our excessive borrowing. It is perceived to be one of the most damaging of our bad spending habits. While borrowing may show that our consumerist society is improving, it does not make your personal wealth a lot better.
People from Dallas have to wake up and start doing something about their debts. It is not easy to get out of debt but it is also not impossible. If you are a resident of Dallas and you see that your debt amount if beyond the average of $28,240, then you need to take a look at the following tips to pay off your debt.
- Know your debts. Compute just how much you owe – both on revolving and non-revolving debts. In most cases, the revolving debts are the accounts that you can make bigger payments so you can get out of it faster. Look at all your debts and see how much you still owe and how long it will take you to pay everything off if you continue paying just the minimum amount.
- Analyze your financial resources and expenses. Next is looking at your finances. How much income are you getting a month? Is it enough to cover all your basic expenses? Do you have extra at the end of the month to help you bloat your current debt payments?
- Make a plan. Once you have these details, you may want to make a debt payment plan that will allow you to make more progressive contributions towards your balance. Check how much you can allot towards your debts and what expenses you can sacrifice in the process. With the new payment plan, how long will it take you to pay off your different credit accounts? There are different methods in paying off your debts and here are two options that Money Talks News suggests for credit cards.
- Check your emergency fund. Before you implement your debt payment plan, check your emergency fund first. Do you have enough? If you have zero, split your extra money so you can make contributions to both your debt payments and your emergency fund. When you have enough to cover at least a month worth of expenses, you can stop growing your emergency fund and concentrate on your expenses.
- Grow your extra money. If you do not have any extra money or even if you do, you may want to look into ways that you can grow that further. The more extra money that you have, the bigger contributions you can make towards your debts and the faster you can get out of them. You can grow your extra money by either increasing your income or decreasing your expenses. Or you can combine both.
- Live on a budget. It helps if you incorporate your debt payments into your monthly budget. That way, the amount allotted for your debt payments will not be accidentally used on something else. This will also help you check if your payment plan is realistic.
- Build a support system. Debt repayment is not easy but it will be if you have other people supporting you. It might be embarrassing but the support and encouragement that you will get can be very rewarding. Bring your family on board. You can even encourage the whole family to save while you are at it.
- Stop accumulating more debt. Finally, discipline yourself and stop taking in more debt. If you cannot stop, then it will be very difficult for you to really solve your debt situation.