Can You Break Free from the Chains of Debt?

Recently, Congress approved a big boost in discretionary spending for 2018, adding $150 billion to the budget. As the US increases its defense spending, the average taxpayer feels more of the burden. This is worsened by tax cuts that are predicted to reduce government revenues noticeably.

Despite these challenges, the strong appeal of the US dollar is expected to keep drawing in foreign investments. However, a potential downside to the US credit outlook is the risk of protectionist trade policies that align with President Trump’s campaign promises. By 2017, the US had a debt-to-GDP ratio of 77%, with a GDP deficit of 3.4%, which is a major concern.

At the national level, the US debt stands at $20.924 trillion, translating to a debt of $63,925 per person and $172,669 per taxpayer. The federal tax revenue is set at $3.368 trillion, or $10,292 per citizen, signaling potential issues.

Household debt in the US is on the rise, approaching $13 trillion by the end of 2017, as per data from the Federal Reserve Bank of New York. Total household debt jumped by $193 billion, hitting $13.15 trillion early in 2018. Credit card debt grew by $26 billion, reaching $834 billion by the end of 2017, and seems likely to keep rising.

Mortgage borrowing increased by 3%, consumer spending went up by 3.8%, and the consumer credit rate jumped by 7.8% annually. The US economy is performing better than expected, with real estate assets rising by $454.3 billion, the most since the third quarter of 2016. For businesses, liquid assets rose from $2.43 trillion to $2.5 trillion quarterly, while government obligations slightly decreased by 0.2%.

These stats have mixed implications for households. Economic growth remains strong, but increased credit card debt and personal lines of credit are concerning. Debt like student loans, car loans, and mortgages is making it harder for families to manage the impact of debt on their incomes.

One major concern is the Federal Reserve Bank’s policy of tightening monetary policy. The CME Group FedWatch Tool forecasts an 88.8% chance of a 25-basis point interest rate hike on March 21, 2018, which could bring the interest rate to around 1.50% – 1.75%. Higher interest rates directly affect personal disposable income and debt repayment.

As rates climb, US households face more stress due to higher interest payments. Even a small 25-basis point increase can add up, reducing income left over after expenses. However, there are silver linings, such as tax cuts that provide taxpayers with more disposable income.

Dealing with debt can be tough, but many people have successfully navigated through it. Take Tyler Perry, for example. He overcame hardships to achieve a net worth of over $400 million by following a strategy for financial success, with advice from Oprah Winfrey:

1. Stay Focused
2. Keep Track of Your Money
3. Know Your Market
4. Save Whenever You Can
5. Believe in Yourself

Perry’s story, along with many others, shows how focusing on long-term goals and adopting strategies to reduce debt and increase savings can lead to better financial health. By managing personal finances well, the broader economic picture can also improve.

Tools like debt consolidation, debt mitigation, and credit counseling can help lighten the load, mostly by reducing the repayments linked to credit lines. The key is to cut down the debt by aligning spending with financial capacity. By living below your means, you can ensure you have extra money at the end of the month.