How the US National Debt Compares to Your Finances

If you’re like most Americans, you probably grimace when you try to balance your checkbook every month. It’s hard to make ends meet with crippling debt casting a shadow over everything you do. But the debt is widespread, and if you’re in the red, you aren’t alone: the United States government is in debt, too. Does the typical American manage their personal finances better than the brightest minds in Washington manage the country’s?

Living in Debt

Look at the numbers, and they’ll tell you that the average American has more than ten thousand dollars in credit card debt, with interest rates in the mid to high range. Not all the debt represents irresponsible spending; the numbers aren’t indicative of millions of Americans living outside their means. A lot of the debt comes from home loans and student loans–people who are chasing the elusive American dream of having a good education and owning their own home. For the average citizen, the American dream just isn’t affordable anymore.

The Average American Household

What does the average American household look like…and how deeply is it into debt? According to the US Census, a little more than half of all American households are comprised of married couples. Almost half of all Americans pursue higher education after finishing high school. The median income in the United States is approximately $47,300 per year.

The Cost of Being Average

Buying an average American home brand-new, however, costs a whopping $272,900 according to the 2010 US Census. Average Americans buying an average home would have to save 100% of their earnings for at least three years before they could afford 100% of the cost–and then they’re left with no money to pay the astronomical energy costs, food and gasoline prices that life requires. In the United States, around 69% are homeowners–70% of them have debt on their properties. Is it any wonder that Americans owe more than ten thousand in credit card debt alone?

Average Debts

On average, Americans owe a debt of about $70,000 on the homes they own. Approximately 20% of all mortgages represent people who owe $100,000 or more on their homes. More students are graduating college in debt than not, owing an average of more than $15,000 on their student loans when they finish their education. If the typical American wants to get a college education and purchase a home, they could be in debt for well over $100,000–more money than they can hope to earn in an entire year of working at a typical American job.

If your finances look anything like the national averages, they probably look pretty grim. But, can the so-called experts really do any better? Your personal debt may be bad, but things could be a lot worse… You could be responsible for the U.S. national debt.

One Nation In the Red

The U.S. currently has a national debt of $14 trillion. How big is that number, really? If it was stacked in five-dollar bills from Washington, D.C. upwards, it would stretch almost to the moon. In the year 2000, the national debt was at $5 trillion. At the current rates, it will reach $23 trillion by the year 2015.

Deficit

The national debt is a problem, but only because of the national deficit. A deficit occurs when you borrow more money than you earn every year. If you have trouble paying down your credit cards, you know exactly what this is like–you have a bill for $200 every week, but you only earn $150. You don’t earn enough to pay your debt, so the debt only grows and grows. This is the problem the government is having. In 2010, the United States will make only around $2 trillion in federal tax revenue. It’s a lot of money…just not when it’s compared to a $14 trillion debt.

Comparing Your Debt to the National Debt

How do your personal finances compare to the government’s? Add up the amount of money you must pay toward your debt every month. Write it down. Add up the amount of money you earn monthly, and write that figure next to it. If the money you earn is greater than or only slightly less than the amount of debt you’re paying, you are managing your finances much, much more successfully than the federal government. You may know how to manage your finances well, but it’s difficult for the typical American to keep themselves out of debt when taxes and interest rates are high–something the government also controls.

Currently, the government spends billions and billions of dollars more than it makes; even the average American knows that’s a bad idea. It’s simple logic that if you own more than you earn, you’re never going to reduce your debt. The more debt you acquire, the more interest you’ll have to pay, until you’re locked in a vicious cycle of owing that only becomes more difficult to break with time. The federal government is in that spiral now, and many average Americans are being dragged down by the whirlpool of debt and spending.

In a single hour, the U.S. government borrows around $168 million. In fact, it borrows around $40,000 every second, more than it costs to live and study in most American universities for an entire year. Average Americans don’t borrow money every second and even if they did, they could never amass debt on the same scale as the government.