Americans reduced their non-mortgage debt by a whopping 22% in just one year, according to Northwestern Mutual’s 2019 Planning & Progress Study.
The change shows that people are using extra money from the good economy and full employment to pay down debt, which is what many said they intended to do, said Chantel Bonneau, wealth management advisor at Northwestern Mutual.
However, it is not all good news when looking at the debt picture. On average, people are spending one-third of their income to pay down debt, not including mortgage payments, the study said, Forty-five percent of people feel anxiety at least once a month because of their debt and 35% feel guilt.
“If you consider that about half of a person’s income goes to other fixed costs, it is very challenging for people to save,” Bonneau said.
The debt figure includes automobile loans, credit card debt and other debt for individuals. The study included 2,003 American adults.
That debt makes 20% of people feel physically ill at least once a month, the study said. Across generations, Gen X reported the highest levels of debt at $36,000 on average, followed by baby boomers at $28,600, millennials at $27,900 and Gen Z at $14,700.
Credit card debt is the main source of debt for most. Thirty-one percent are paying interest rates on their credit cards greater than 15%; 12% say they always pay only the minimum required; and 18% have four or more credits cards.
Even more alarming, according to Bonneau, is the fact that 20% said they are not sure how much debt they have and 34% said they are unsure how much of their monthly income goes toward paying off their debt.
In order to get a handle on their debt, people need to know where they are starting from, the company said.
“They need to take the time to understand their balance sheet,” Bonneau said, adding that financial advisors can play a crucial role in making that determination and setting up a strategy for attacking the debt.