In order to extensively fight off credit card debt, many consumers have been trying to pay off their bills and cut down on unnecessary spending and the buying of luxury items.
The tax refunds that were granted by the government this year were used by most of the consumers to pay off credit card debt and other outstanding bills rather than making smaller purchases or buying a single big item.
Be Careful When Doing Financial Management
It is better to be careful when doing financial management, particularly when the economic recession continues to hold back growth and unemployment rates are still quite high.
A recent report states that many Americans are making actual progress with their debt management efforts. According to the first quarter report for the flow of funds that has been issued by the Federal Reserve, the household debt for businesses, governments, and individual families has shown contraction for the second consecutive quarter.
Loss Of Net Worth
The Federal Reserve reported that consumer credit shrank at an annual rate of 3.5%. Due to the ups and downs of the recession, many households have lost wealth resulting in decreased borrowing rates. In fact, the net worth of household, which is the difference between the value of assets and liabilities, is currently at about $50.4 trillion, which is about a $1.3 trillion drop from the last reading.
The two big factors that have contributed most to the loss of net worth are the falling stock portfolios and the lower home values.
But the federal government boosted its own spending at the same time that the household debt was dropping. According to the Fed’s flow of funds report, government debt was at 23% in the first quarter, with most of the cash flowing to damaged Wall Street banks and the new programs aimed at stimulating job development across the country.
That’s pretty amazing that Americans are making progress with their debt during these rough times. Great article.