Wednesday, October 7, 2015

Dying in Debt, the new reality?

According to a new survey  almost one in five Americans in debt expects to die while still in debt, and more than a third of American consumers already are shouldering new loans during this holiday season.

The survey found that 17 percent of all Americans who are 65 or older believe they will never get out of debt. When we tighten the focus to people that age who now are paying off loans, the pessimism is far more profound: 31 percent -- nearly one in three -- believe they will die as debtors.

The national survey, commissioned by and conducted the first week of December as the frenzy of holiday shopping approached critical mass, found that for many Americans, debt will be a lifelong, inescapable companion.

In fact, 18 percent of those already in debt expect to take their loans to the grave. That's double the 9 percent who expressed that pessimistic view the last time asked the question in May 2013. This time around, another 11 percent don't expect to get out of debt until they're at least in their 70s. The average age people expect to achieve freedom from debt is 53, the same age as in 2013.

The survey of 1,001 Americans, performed Dec. 4-7 by landline telephone and cellphone, did find some people who disdain debt: About 14 percent of all respondents said they are completely debt free, at least for now, and 60 percent had not yet signed off on any new debts for this season's holiday purchases.

Respondents were asked about their expectations regarding the debt they already have -- credit card bills, car loans, student loans, mortgages, etc. -- and, separately, about the debt they already had incurred for the holidays.

Other findings
The survey also found:
  • Women are half again as likely as men to believe they will not be able to pay off their loans during their lifetimes. Fifteen percent of all female respondents chose "never" in comparison to 10 percent of men.
  • Only 6 percent of already-indebted millennials say they will never get out of debt, compared with 31 percent of debtors age 65 and older and 22 percent between the ages of 50 and 64. Experts admire the optimism of the young, but fear that it is not realistic.
  • White, non-Hispanic consumers are considerably more likely to see themselves dying in debt (15 percent) than black Americans (9 percent) or Hispanic Americans (8 percent). "This is an intriguing set of data," Viale said. "At first glance, I would guess that the numbers reflect the fact that more of the white non-Hispanic consumers are carrying student loan debt."
  • Pessimistic responses regarding eventual freedom from debt were remarkably consistent across all income levels: Those earning less than $30,000 a year are about as likely to choose "never" (14 percent) as those at all other income levels ($30,000 to $49,900 -- 12 percent; $50,000 to $74,900 -- 14 percent; more than $75,000 -- 12 percent).
  • Still, households with annual incomes of at least $75,000 are most likely to incur holiday debt.

Economists and financial advisers said most consumers have not become grotesquely reckless when it comes to debt. Rather, we all have been doing what we can to deal with the aftermath of the Great Recession, officially considered to have lasted from 2007 to 2009, but which lingered long after that for many Americans.

"The reality is that we went through a really bad financial crisis, and there are consequences to that," said Angela Lyons, an associate professor at the University of Illinois and director of the school's Center for Economic and Financial Education. "Those consequences do not go away overnight, and we have to pay for them over ti

Meanwhile, more and more of the elderly are falling deeper into debt as they retire. One reason, once again: The lingering effects of the Great Recession, including much heavier mortgage burdens, caused in part by the need to raise cash during the recession. The U.S. Consumer Financial Protection Bureau reported earlier this year that, from 2001 to 2011, the median amount owed by people 65 or older on their mortgages increased by a startling 82 percent, from about $43,400 to $79,000.

The smartest plan now, according to the experts: Take a clear-eyed look at your debt load and at how it affects your life. Contact a certified credit counselor. Look online or at local institutions for financial literacy information and courses.

The value of financial education can't be understated, until now, most young people have adopted the financial behavior of their parents, who also never formally learned about personal finance during their school years. That's a recipe for disaster.

Financial freedom doesn't require that you make a lot of money. It simply means that you know how to live within your means and make your money work for you as you achieve your financial goals.

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