Americans Making Good On Promise to Pay Off Debt
If the results of an American Express survey are correct, consumers are making good on their promise to pay down their debts.
Three-fourths of consumers surveyed said there has been no increase in their debt level over the past six months, and more than a third—some 38 percent—say their debt has actually decreased.
In fact, consumers may be focusing even harder on debt reduction than they did earlier this year. If you compare the results of this latest survey to one taken at the beginning of the year, there appears to be a greater emphasis on reducing debt.
When American Express questioned consumers during the first week of January about their saving and spending habits, many talked about wanting to find the right balance between saving and spending.
At that time, getting on a budget and managing finances were the top choices—with 51 percent of those surveyed expressing these goals. Only about 21 percent of those surveyed wanted to reduce or wipe out their debt.
But in its latest "Spending & Savings Tracker," which was conducted in mid-June, more Americans appear to be focused on paying down debt rather than saving.
About 46 percent of respondents said they were focused on debt reduction, while 29 percent said their goal was saving. What's more, about 57 percent of consumers with debt said the have been moving forward with a specific plan to reduce or stabilize their debt.
This is a trend we have seen before. Even in the recent news about the downward shift in consumer credit scores, there were signs that some of the most creditworthy consumers were improving their scores by paying down their debt.
Not surprisingly, while a third of those surveyed by American Express said they had actually reduced their debt in the first half of this year, those with incomes above $100,000 and those young professionals under 30 years of age who make more than $50,000 a year, were having more success than the general population.
Among the affluent consumers, 52 percent have reduced their debt since the start of the year, while about 46 percent of young professionals had done the same.
But this focus on cutting debt may put more pressure on consumer spending. With debt reduction an important goal for so many consumers, it may not be surprising to see that only 15 percent of those surveyed plan to spend more in the second half of this year than they did in the first half.
And consumers also are less optimistic about how much money they can save for a rainy day. At the start of 2010, Americans were trying to save an average of $14,000, but now the average savings goal has dropped to $12,000.
According to the survey, about one-fourth of consumers have reached their savings goal over the first half of the year. For those who failed, rising utility and grocery bills or unanticipated emergencies were two of the most common reasons given for their shortfalls.
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