Today on CNN.com there was an article that began by talking about how a middle class family doesn’t feel so middle class any more. The article went on to give some statistics about the current economic climate – one of which jumped out at me:
All this financial stress comes at a time when most Americans have the thinnest savings cushion to fall back on. They have been loading up on debt in recent years, drawing on the equity in their homes, in particular. The percentage of their disposable income that goes toward debt payments is at 14.3%, near the all-time high.
Good grief! More than 14% of the average American’s disposable income is going towards debt payments. Ugh – what a disaster. Let’s do some math…
Assuming that the average American family $120,000 per year in a two-income household, that means that take home pay after taxes would be something like $90,000 (possibly less). Now, if we believe CNN’s statistic above, then almost $13,000 of that take home income is directed towards debt payments annually. Gross!
Sure, I pay a bucket load of student loan debt, but that’s to be expected from someone who only stopped going to school two years ago. Imagine the typical American family with 2 or 3 kids who not only has to pay this much towards consumer and housing debt, but also has to put food on the table and clothes on the kids!
It’s rough out there. Now more than ever people should be socking money away into a savings account (after paying off as much consumer debt – credit card debt – as possible).
Good post Joe and very true. We’ve got exactly the same kind of thing going down in the UK. VERY SCARY – but a wake up call for all concerned I think.