Archive for 30th August 2006

This Much Debt is a BAD thing

8/30/2006, 5:34 am

We’re making financial history in the US. In a bad sort of way.

For the first time, Americans owe more than we earn. According to a study by the Center for American Progress, household debt has surpassed household income and is at 108.4 percent in 2005. The Federal Reserve Board reports consumers took an incredible $431 billion in cash out of their home equity last year.

People think weirdly about cash out refinancing. Some even refer to it as using their ‘home ATM’. Many act as if this loan against their equity is free money. It isn’t. Every penny of equity cashed out by refinancing is debt!

And that we owe more than we earn means we can’t expect this to end well.

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