ST. LOUIS, Mo. _U.S. household debt reached a new record of $12.8 trillion dollars in the second quarter. That’s according to the quarterly report from the Federal Reserve Bank of New York.
The last time the debt level was nearly this high was in 2008, when the U.S. economy was mired in a recession.
Peter Lazaroff, Chief Investment Officer for Plancorp, joined us to explain.
What trends have caused household debt to rise to these record levels?
•Rising mortgage debt, auto loan originations, uptick in credit card balances
•Increases reflect renewed confidence in the economy as well as also population growth and income growth
With the stock market at all-time highs and the amount of credit rising, should we be concerned about another financial crisis?
•Losses are a normal part of stock investing.
•Rather than try to predict the next downturn, you are better off planning on downturns occurring with a similar frequency as they have in the past.
•Today`s environment is much different than the horrible debt situation leading into the financial crisis
What makes today`s credit levels different than prior to the financial crisis?
•While overall debt has increased, the figures aren`t adjusted for the growth of the population or the economy.
•There also were new records for the size of the us population, gdp, total household income, net wroth and (most importantly) disposable personal income.
•That said, this serves as an opportunity to remember best practices with debt
What are some good habits when it comes to debt management?
•There is good debt and bad debt
•Understand your credit score
•Create a plan to pay off debts