Keeping up with the Joneses now means getting debt relief

Rime of the Ancient Mariner

Just like in the "Rime of the Ancient Mariner," fewer people want an albatross around their neck like debt. Image from Wikimedia Commons.

Everyone has heard the phrase “keeping up with the Joneses,” and it means doing the things everyone else is doing to keep status. This instinct is what drives people to do things like get flat screen televisions, iPhones, riding lawnmowers and so forth. Well, according to the Federal Reserve, the Joneses are getting debt settlement relief these days instead of putting more stuff their credit cards.

Household debt falling, says Fed

The Federal Reserve recently released new data about the levels of household debt in America. It seems that once the recession came, people decided to tighten their belts and pay things off. (A little debt consolidation never hurt anyone.) According to the Wall Street Journal, consumer debt levels have fallen for seven straight quarters. Second quarter of 2010 showed a 1.5 percent reduction from the past quarter and a 6.5 percent reduction from the previous peak, in third quarter of 2008. That’s $178 billion of debt that’s been paid off in the last three months. That’s a lot of people essentially giving themselves a cash advance every month.

A few caveats

Falling household debt and an increased savings rate isn’t the entire picture. Not only did consumer debt go down, the delinquency rate went down as well. This quarter was also the first instance of delinquent debt being reduced, which fell by 0.5 percent. However, as a corollary, bankruptcies increased by 34 percent. It seems fewer people are using payday loans to keep up with paying for credit cards, as 272 million accounts were closed and only 161 million opened. At this rate, credit card companies might need an emergency loan themselves.

Getting rid of debt

Overall, more Americans are trying to get rid of debt. More people are trying to pay credit cards off than get new ones. Unfortunately, though, more people are filing for bankruptcy. Still, there are a lot of positive signs that people want to stay out of debt, preferring the security of cold, hard, cash.

Further Reading

Wall Street Journal

Other recent posts by bryanh