The holiday season is here and that means stores packed with shoppers and merchants dangling sales in front of them at every turn. For stores, it’s the time of the year they can climb out of the red and into the black. For consumers, it’s the time to buy things for loved ones and sometimes even treat ourselves.
Win-win, right? Well, not necessarily, according to some of the world’s most influential economists. Underneath the good cheer are some stark numbers that responsible consumers should be aware of.
Household debt ‘ the total amount of consumer debt of people under one roof, including auto loans, credit card debt and mortgages ‘ has surpassed levels not seen since the Great Recession of 2008. Economists at Deutsche Bank said in a recent note that this in itself is not necessarily a cause for alarm.
We’ve written about how consumer credit card debt has reached a record high as U.S. lenders have opened the floodgates on credit. What economists are saying now is that the income of some Americans is masking the toll all this spending is taking on others.
U.S. households appear to be holding their own, meaning that on paper they look like they can pay back a record-$12.58 trillion in debt. What is interesting, though, is that regular Americans are not the ones keeping the numbers from being so alarming — it’s the super-wealthy.
For months now, Americans have been increasingly using their credit cards to buy things, slowly racking balances.
The recent Deutsche Bank note mentioned by Business Insider identified the soaring pay of wealthy Americans as skewing U.S. incomes, but “underneath the surface, there may be incipient cracks forming,” according to economists.
In other words, the debt that Americans are incurring may come back to bite them in the rear. That means being responsible this holiday season and tackling your debt makes all the (dollars and) sense in the world right now.
Clark says instead of focusing on your monthly payment shown on your credit card bill, look for another number.
One good rule to go by is to throw any excess cash you have at your debt. This way, you’re seamlessly reducing your bills in an organic way, without much effort. Examples of excess cash could be a tax refund or bonus from work.
Another tried-and-true tactic when you’re in stores this holiday is to not use a shopping cart. Clark says you’ll be surprised how it conditions you to get only what you can carry ‘ and leave with more money in your wallet!