Household Debt Ratios
Preferred Financial Services, Inc reviews and discusses the most recent Household Debt Service and Financial Obligations Ratios data released by the Federal Reserve …
Andover, Massachusetts April 26th 2010—Preferred Financial Services has reviewed the most recent data released by the Federal Reserve in regards to household debt ratios and continues to see signs that the economic recession has changed consumer habits in the short term. The verdict on any long term change is still up for discussion as not enough time has passed for accurate predictions to be made.
As expected, the household debt (mortgage and consumer debt) to disposable personal income ratio continues to drop, hitting a 9 year low of 12.6. This means that 12.6% of all the disposable personal income of the average American is going towards debt service payments. This ratio went as high as 13.92 in the first quarter of 2008. This was the peak of the economic bubble where people were maximizing their debt payments to sustain a lavish and unsustainable lifestyle. As the economy started to falter and household income and spending took a hit due to property value plunges, foreclosures, job losses and income insecurity, this ratio has been on a steady decline.
This decline proves that Americans have changed their spending habits due to the economy, something that was not a foregone conclusion when the economy first started to slow down. The question everyone is asking now is if the old habits will reappear once the economy improves or if Americans have actually changed how they live and manage their finances. If we do revert back to our old spending habits, our economy might improve quicker due to higher consumer spending and thus economic growth. However, that means we didn’t learn from our past mistakes and are setting ourselves up for a repeat of the disaster of 2008. If it is a permanent shift in consumer spending, past assumptions about the American economy and the strength of consumer spending will not be true anymore. Consumer spending has been the engine of growth for the American economy since the end of World War 2, are we witnessing a fundamental shift of the American consumer? Only time will tell.
Preferred Financial Services is a debt reduction firm certified by the CFC (Center for Financial Certifications) and accredited by U.S.O.B.A. (United States Organizations for Bankruptcy Alternatives). Headquartered in Andover, Massachusetts, Preferred Financial Services has been a leader in the debt reduction industry since 2003. Preferred Financial Services has acquired some of the best experience in the industry over the past 7 years. In 2009 alone Preferred Financial Services reduced over $16.5 million worth of consumer debt for just $6.4 million, for a savings of about 60%- and over 2,900 accounts were settled on behalf of their clients.
For more information, please visit: www.pfsdebtrelief.com
Contact:
Stephan Tavernini
stavernini@pfs1.net
