Personal Finance and Money Management

There was a cartoon in a newspaper that showed an up trending stock market with a man standing next to it labeled “consumer”. On his back are a number of bags stuffed full and they are labeled with words like unemployment and foreclosures.

It is easy in the place of consumers to feel as if things are returning to the way they were before the recession while the average taxpayer shoulders the burden of a recession. So where do consumers really stand today in terms of debt as many struggle to readjust to a not-so-new economy?

Equifax has released some new numbers for September 2009 and they give a good thumbnail sketch of what consumers are dealing with and how they are responding to the recession. It is not a happy picture in most areas because there is a growing number of both delinquent mortgage payments and housing foreclosures. Other types of loans are reporting increasing delinquencies also.

On the upside, consumers are making a absolute effort to pay down their credit cards while credit card companies are reducing give faith to limits. This shows that consumers are learning how to rely less on borrowed money to pay their bills. The sum up of new credit cards being improved each month has been cut in half too.

Though equity markets are rising, the wealth is not held in the hands of consumers struggling with mortgages they can’t afford any longer. A whopping 7.65 percent of US mortgages have monthly payments that are past due by at minutest 30 days as of September. You can compare this number to the 3.55 percent of mortgage delinquencies Equifax indicated on the September 2007 report.

It’s not just primary mortgages that are rising either. All loan delinquencies are on the rise in the United States except for student loan defaults. Applications for student loans are rising though as the unemployed return to school to develop new skills and expand their employment opportunities. In addition, many students are choosing to remain in school rather than graduate since employment prospects are grim right now.

Equifax evaluated 200 million accounts for their consumer credit report. What the company discovered was that consumers are paying down their high interest loans like credit cards.

Overall the US consumer debt has declined by $440 billion although it remains at a total of $11 trillion. These numbers include everything debt including credit cards and auto loans.

The number of bankruptcies is rising too. There have been 1 million bankruptcies filed this year already. That is not surprising considering that US unemployment is at 9.8 percent meaning there are over 6 million people looking for jobs.

Amazingly the savings rate in the US is finally rising. Americans are notorious for not saving money for emergencies and living beyond their income. But the recession has apparently made many consumers realize they need any emergency fund. The savings rate has risen to 3.71 percent as of September 2009.

So what does all this mean? It means the US plan will not be able to resume full recovery till unemployment declines and consumer spending rises. But it also seems to indicate Americans are learning they need to better manage their debt.

Unfortunately there are many folks learning the hard way as they grapple with unemployment and foreclosure.

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