INSIGHT: Average American’s Personal Debt is $42,553, Income $34,000

The debt includes home mortgage loans, credit and retail card loans, auto loans, student loans, etc.

SoDATA (South Data) — An average American’s personal debt increased over five year (22nd straight quarter) period as more households took out loans to buy homes or refinance existing mortgages. As a result, U.S. household debt has exceeded $14 trillion for the first time, according to a report released from the Federal Reserve Bank of New York and cited by Yahoo Finance/Bloomberg.

As the average number of people per household in the United States is 2.52, each household (family) is carrying a debt of $107,234 (PKR16.08m).

With an estimated population of 329m, each American is carrying (money owed to banks and lending institutions) a personal debt of $42,553 (PKR6.38m) on the average. The nominal median income per capita is close to $34,000.

Any up and down in interest rate, stock index, or consumer price index, etc. affects an average American’s ability to pay the bills.

The media and the government and analysts through use of indexes monitor the fiscal albeit economic health of the economy driven by debt carrying capability of the population in order to support consumer based economy.

The higher the disposable income of an average income, the larger the debt carrying facilities lending institutions provide.

The above debt each US household is carrying excludes government’s local and foreign (if any) borrowings.

In contrast, South Asian (including Pakistanis) households on the average do not borrow loans (specially mortgage and auto loans) from banks and lending institutions. Credit card use (consumer loans) is on the rise though.

So why does some media generally report “On the average a Pakistani owes so much?

Example: As of March 2019,the external debt of Pakistan (that the governments and state institutions cumulatively borrowed to finance their budgets and debts management requirements) was roughly $105 billion. This included $11.3 billion to Paris Club, $27 billion to multilateral donors, $5.765 billion to International Monetary Fund (IMF), and $12 billion to international bonds such as Eurobond, and Sukuk.

With a population of approx 208m, the external debt of Pakistan translates into $505 (PK75,750) per citizen. This is the representative figure some media generally portrays as the money every citizen owes to the world lending institutions.

US $ = PKR150.