Nearly one-quarter of households in the United States have no emergency savings and 28% have some, but not enough to cover three months of living expenses, according to the results of a poll released by American Consumer Credit Counseling.
To make the situation even more dire, 43% of individuals expect to add to their current debt levels in the second half of 2022, an indication that things are going to get worse before they get better, according to data released by LendingTree.
The interesting thing about debt is that it acts as both a show of confidence or evidence of a struggle. “Many people take on debt because they feel good about their financial situation and aren’t too worried about paying a little interest if it gets them what they want or need,” said Matt Schulz, LendingTree’s chief credit analyst, in a published report. “Plenty of others take on debt because they have to. There’s no question that both situations are happening right now.”
The most common reasons why people are in debt right now are because of necessities, emergencies, and health or medical issues, according to LendingTree’s report. Only 21% of consumers are not carrying any debt right now.
There appears to be a direct correlation between an individual’s credit score and whether that person is carrying any debt. For example, 80% of individuals with credit scores between 300 and 579 are carrying some amount of debt, compared with just 46% of individuals with credit scores in excess of 800.
Sticking to a strict budget, putting any extra money towards paying off debt, and making minimum payments until the debt was paid off were the three most popular strategies used by individuals who were able to get themselves out of debt.
