Author: Elyssa Carlos

Increasing Debt in Younger Creditors

It’s not news that as of late income levels have not been enough to cover the rising costs of living. This has prevented individuals and families from savings, investing, and building wealth overall. Even worse, it has led to an increase in total non-mortgage debt among younger creditors, especially those in their 20s and 30s.

Current Trends

Credit card reporting company, Experian, published a report in 2020 describing the average non-mortgage debt belonging to Gen Z and Millennial consumers. The average debts were $10,942 and $27,251 respectively. These debts can include credit card debt, auto loans, student loans, etc. When also including mortgage debt, these figures skyrocket, especially between ages 23 and 39 when major milestones and life changes are occurring. These can include starting a family, vacationing, purchasing a home, and more. Even though these are trends for some young creditors, it is important to note that increasing debt has also prevented these demographics from reaching certain milestones. Young adults with student loans have been less likely to have children or be married. Although some Millennials are becoming homeowners, many are underwater on their mortgages.

Catalysts

Some have blamed this surge on younger creditors’ need to pay for higher education, especially since the cost of tuition has been on the rise in recent years. Pair that with the rising cost of living and decades of slow income growth, and the result is young creditors relying on using credit cards to cover their expenses. The main issue experts are seeing is that these groups are not only taking on more debt with more intensity than previous generations, but they are acquiring it earlier and holding on to it for longer.

How to Prevent Rising Debt in Younger Creditors

Many experts are calling for more education in personal finance for young people. Teaching things like the dangers of taking on too much debt, bankruptcy, or how to understand credit card agreements could potentially reduce the amount of debt young people take on. Studies have shown that Millennials who received financial advice from a parent or trusted adult reported fewer financial burdens than those who either received no advice or received advice from uncredible sources.

What’s Next for Younger Creditors?

On the bright side, these generations are at least showing signs of having good credit habits, including paying their monthly payments on time and monitoring their credit. Still, if the burden of debt becomes too overwhelming, it may be more beneficial to seek help from professionals. If you need help with debt, give us a call at 800-470-8155 for a free consultation.

October 6, 2022
Immigrants & Unsecured Debt

Exploring how U.S. consumers utilize credit can be indicative of the economy as a whole, especially when looking closely at the behaviors of immigrants in the country. Recent studies have found that immigrants have the tendency to be underbanked, in other words, they are less inclined to have unsecured debt such as loans that are not backed by collateral, like credit cards, medical bills, utility bills, and most personal loans.

Are immigrants eligible for loans in the U.S.?

Starting life over in a new country can be a daunting and financially unstable process. It’s fair to assume that sometimes loans are necessary to help make it more affordable and less stressful. Unbeknownst to many, it is possible to obtain a loan without a credit history or Social Security number. However, loans are only given to non-citizens who plan to stay and work in the country for at least three years after the loan is given.

Why are immigrants underbanked in the U.S.?

It might be hard to believe that immigrants are underbanked since they constituted about 17% of the U.S. labor force in 2019 and paid more than $330 billion in income taxes that same year. It begs the question, if they are contributing to the U.S. economy through labor and tax dollars, why not take advantage of the financial institutions and loans available?

Surveys have shown that many are limited when it comes to interactions with banks because of language barriers, while others are too hesitant out of fear of being deported. This has been especially true since the Trump Administration passed a law in 2019 that allows the government to determine immigration status changes based on the immigrant’s financial situation. However, the Biden Administration has recently proposed a new immigration policy that seeks to end the Trump era policies.

Debt Relief for Immigrants

Even though many immigrants in the U.S. are underbanked and have only minimal amounts of debt, this is unfortunately not the case for all U.S, consumers. Many are burdened by large amounts of debt caused by the high cost of living. Some are financially crippled by debt as there may not be many opportunities for career advancement or wage increases to offset their debt burden. If you need help with debt, give us a call at 800-470-8155 for a free consultation.

September 22, 2022
Inflation vs. Recession: What’s the Difference?
During economic discussion, we hear the terms “inflation” and “recession” quite often. While the two terms are often assumed to be similar, or steppingstones for each other, they actually have opposite effects on the economy.

Inflation

Inflation occurs when prices of goods and services increase over time. Put simply, inflation is the reason a gallon of gasoline costs $4.65 in 2022, but only $1.45 in 2002. Inflation occurs because of a few different scenarios:
- Demand begins to overpower supply
- Production costs increase, leading to an increase in price for final products
- Wages increase, leading to a rise in costs of goods and services
It’s important to note that economists and government agencies like the Federal Reserve and the Federal Open Markets Committee (FOMC) find a certain rate of inflation to be healthy. In fact, the FOMC claims that a 2% inflation rate is necessary for ideal employment and price stability in the economy. However, in times of high inflation, it can reduce the buying power of consumers because the value of money decreases. If we think back to our example of gas prices increasing over the last 20 years, we can see that the high jump in cost in the U.S. is simply not affordable for everyone. This is when the word “inflation” becomes a frightening term.

On the other hand, inflation does favor those who hold assets as those values will increase. Things like real estate, commodities, stocks and bonds become more valuable and popular methods of storing value during inflation periods.

Recession

Recession, on the other hand, is a period of consistent negative growth in the economy. This is exemplified through a few circumstances.
- A decline in the Gross Domestic Product (Real GDP) over two consecutive quarters, or a fall in the value of goods and services produced by the U.S economy after prices have been adjusted for inflation or deflation
- A rise in unemployment rates
- A decline in price of assets, including bonds, equities, real estate, commodities and more
The most recent and official recession was in 2008. The U.S.’s GDP dropped 4.3% and the unemployment rate was around 10% at its worst. The massive economic crisis lasted 18 months and finally improved after the government issued a $700 billion bailout to banks, insurance and automobile companies, as well as another $800 billion stimulus package that cut taxes and created jobs.

Debt Relief During Inflation and Recessions

Knowing signs of a recession is important but planning for one is a financial necessity. Preparing a well-thought-out budget and having emergency savings are just a couple things anyone can do to prepare for a recession. If you have more financial power to do things like making safe investments or repaying high-interest debt, you’ll be in better shape.

If you need help with debt, give us a call at 800-470-8155 for a free consultation.
September 7, 2022