A third quarter report from the Federal Reserve Bank of New York’s Center for Microeconomic Data found that in the third quarter of last year, overall household debt jumped 0.7% to $13.95 trillion. Nominally speaking, this total exceeds the previous peak of $12.68 trillion, which was reported in the third quarter of 2008.
The report breaks down the debt as follows:
- Mortgage balances amounted to $9.44 trillion, which is a $31 billion increase over the previous quarter.
- Home equity lines of credit declined by $3 billion since Q2, bringing the total to $396 billion.
- Other types of debt, such as auto loans, credit cards, and student loans, increased by $64 billion.
The fact that household debt has exceeded its 2008 historic high indicates that a lot of New Yorkers may be accumulating more debt than they can handle. Fortunately, there are steps, both preventative and corrective, that can help.
According to Debt.org, housing costs should, ideally, not exceed 25% of your income, While the prospect of a 15-year mortgage may be appealing because you can pay it off faster, your financial situation may make a longer term with lower payments easier to sustain.
With their tendency to depreciate over time, motor vehicles are not a good investment, and your loan payments should amount to no more than 10% of your gross monthly income. Try to make as big a down payment as possible to reduce payments even further.
With student loans, the ideal is that you don’t borrow more than you expect to make during your first year after graduation. Depending on your chosen career and its average entry-level salary, you may be better off attending a state university close to where you live instead of an expensive private school in another state.
Credit cards should be used for unexpected expenses that you can’t afford to cover immediately, such as a medical emergency or roof collapse. When you use your Visa or MasterCard to pay for groceries and utility bills, problems can arise.
How can you tell if your debt is too high?
Here are some signs that you may be carrying too much debt:
- Consumer debts like medical bills, credit cards, and lines of credit amount over half of your income.
- You’ve maxed out your credit cards.
- You can only manage the minimum payments on your consumer debts.
- Your bank account is frequently at or below $0.
If your debts are too high and creditors are calling or threatening lawsuits, a New York bankruptcy attorney may be able to help you get back on track financially. A Chapter 7 bankruptcy filing can eliminate most unsecured debt and give you the breathing room you need to start over.
Jayson Lutzky is a seasoned Bronx bankruptcy lawyer who offers free in-office initial consultations. To set up an appointment, call 718-329-9500.