Americans in these 13 States Owe More than They Make a Year

According to data from the Federal Reserve, total household debt in the United States has surged to $12.84 trillion, up by more than half a trillion in the last year.

Borrowers in 13 states now owe more than they make in a year and the average household pays a dollar out of every $5 in income just to make monthly payments to debt.

The Average American Debt is Exploding

It’s not just how much debt you owe but also how much you make to pay off that debt. People in the District of Columbia owe more than any other state but also have one of the highest annual incomes.

Borrowers in thirteen states owe more than their median household income. That’s not to say that the rest of the states are off-the-hook. The average debt-to-income of 91% shows it would take nearly a full-year’s income to pay off household debt.

Why Do Americans Borrow so Much Debt?

We’ve always been a consumer nation. Consumer spending drives more than 70% of the economy.

The problem lately is that wages just aren’t growing like in the past. The Bureau of Labor Statistics reports that hourly compensation has increased just 2.2% a year.

Getting a loan isn’t bad. I see a lot of debt-free blogs telling people to pay off all debt and cut up the credit cards. I guess I’m more of a debt agnostic. It’s ok to borrow money as long as you know how to do it right.

Getting a Loan without Getting in Trouble

– Borrowing to buy a home offers rewards beyond the money and you can deduct the interest from your income for taxes. – Most businesses borrow to invest and buy equipment. Getting a loan makes sense if you can turn it into a higher rate of return.

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