How Much Debt Do Americans Have? (By Age AND By Type!)

You've heard us say it before and you'll hear us say it again: debt is chainsaw dangerous. While debt can be a useful tool to achieve your financial goals, debt can quickly become napalm to your financial future. We break down how much debt every generation of Americans has and look at exactly what types of debt are the largest. Throughout, we share got TONS of practical tips to implement in your life when it comes to debt! ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Jump start your journey with our FREE financial resources⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Reach your goals faster with our products⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Take the relationship to the next level: become a client⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Subscribe on YouTube for early access and go beyond the podcast⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Connect with us on social media for more content⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. ⁠⁠⁠⁠⁠⁠⁠⁠⁠DRINKAG1.com/MONEYGUY Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  This episode is brought to you by Indeed. You're ready to level up your business, but the pressure to find the right person to make that happen is intense. Indeed sponsored jobs can help carry the load. It boosts your job post to help it reach quality talent fast. Cut through the chaos with Indeed sponsored jobs. Get a $75 sponsored job credit at indeed.com/podcast. Terms and conditions apply. Hiring now? Then this is a job for Indeed sponsored jobs.

• 0:31Speaker 01

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• 0:59Brian Preston?

  Debt, America's favorite four-letter word. Are you doing better than the average American?

• 1:04Speaker 03

  Brian, I am so excited to talk about this because we know that debt, on one hand, can be an amazing tool, but it can also be so, so dangerous.

• 1:13Brian Preston?

  So we're going to walk you through how much debt each generation has, break it down by type, and give you some lessons to take away from each. So with that, let's jump right in.

• 1:29Speaker 03

  Yeah, Brian, debt is one of the biggest problems that's facing many Americans. We know that right now, according to Experian, the average American owes $23,000 in non-mortgage debt. So the average balance across all of the Americans that live in this country, $23,000.

• 1:48Brian Preston?

  Here's to give you context on this. If you take into account... How many people have more emergency savings than debt? It's just only 53% have that. So it's almost like a coin flip where people have more debt than they even have emergency reserves.

• 2:04Speaker 03

  And then what about this? 54% of US adults would not be able to cover three months of expenses if an emergency happens. So the average American has $23,000 of non-mortgage debt. And one out of two Americans could not cover an expense without going into debt. That is problematic. That's not the way that we want you living because we truly believe that there is indeed a better way to do money. If you've not figured out how debt actually works, you're likely not doing money the right way.

• 2:36Brian Preston?

  So here's what we want to do. We want to go into each generation and try to figure out, how do you avoid this? What, it will give you the stats and figures, but then also give you a way out of this trap.

• 2:46Speaker 03

  So let's start at the very beginning, Brian. Let's talk about Gen Z'ers. These are folks right now that are like age 18 to 28. And we can tell, we know this because me and you talk about it all the time. The twenties is probably the most powerful decade there is for compounding interest to work for you. But also if you do it wrong, it can be one of the most devastating decades for compound interest to begin working against you.

• 3:10Brian Preston?

  Yeah, this is the decade, guys. I tell you all the time, if you just go look at our wealth multiplier, if you go look at our content at moneyguy.com/resources, you have the world by its tail. You literally, if you just do anything for the positive with saving and investing, you're going to be rewarded many times over. Unfortunately, this is when consumption and, and all the influences of all, everybody who's out there, marketing and advertising to you also falls into prey that you think, well, debt is the bridge that will get me out of my problem is I'm short on money. So I'll just use debt as that bridge that'll get me through this period until I get all the pay raises to get me up. All of this works against you. You lose out on the time and you fall into this debt trap.

• 3:54Brian Preston?

  And that's what we need to kind of give you some context. What does Gen Z look like when you talk about specifically debt?

• 4:01Speaker 03

  Yeah, let's look at it categorically. Let's start with student loan debt. Again, these are folks that are 18 to 28 years old. If you look at all of the Gen Z'ers that have student loan debt, the average student loan debt for those that carry it is $19,000. If we think about auto loans, automobile debt, the average car loan for a Gen Z'er that carries a car loan, $21,000.

• 4:26Brian Preston?

  And those car payments for the monthly payments for Gen Z, right under $600 with actually $577 a month.

• 4:33Speaker 03

  You know, the most heartbreaking thing about that, Brian, that these Gen Z'ers have a car payment of $577. Do you realize that is almost the exact amount it would take to max out a Roth IRA? If you just did that on a monthly basis and yet it's going to automobiles, it's going to debt.

• 4:46Brian Preston?

  Yeah, think about it. Think about it. When you get older, nobody thinks about in their twenties, though, what it's going to be like to be in your 50s and 60s and beyond. And that's the thing that it breaks my heart is because you're going to look back on that car that costs you $577 a month and it will not be the same source of comfort that that Roth IRA would be.

• 5:04Speaker 03

  So then we go on to mortgage debt. Again, this is Gen Z's that have mortgages. The average mortgage debt is about $248,000. And then this one is the most devastating. If you look at Gen Z'ers that carry credit card debt, the average credit card balance that carry it month to month from credit card users that carry a balance, $3,700. So if you take all of these folks that have debt and you combine it with all the Gen Z'ers that don't have debt and you just look at the total population of Gen Z adults, the total average debt for folks who fall into this age category, $23,300.

• 5:41Brian Preston?

  Okay, so we got to help people figure out, how do you avoid falling into these pitfalls? So I don't want you to be average. I want you to be a financial mutant. So we got to talk about this. First thing, student loans. Look, we know education, making yourself better, increasing your ability to have a bigger shovel of your income is a positive thing.

• 6:01Speaker 03

  Absolutely.

• 6:01Brian Preston?

  But somehow we've turned this positive event into a negative. So at least you have to kind of figure out with student loans, if we know education is good and improving yourself is good, where are the bounds? So we don't get too much of a good thing and actually suffocate ourselves with student loan debt. And we always say, begin with the end in mind. What do we mean by that?

• 6:20Speaker 03

  Yeah, I think you ought to be thinking about when I'm racking up the student loan debt. What is the outcome that I want? Far too often, I think just because people could get student loan debt, just because it was easy loose money, they did it. Rather, we want you thinking about what is my degree actually going to provide me? And if you can think about it inside of this mathematical construct that I don't want my total amount of student loan debt to be greater than what I anticipate my first year salary being. We call this the first year financing rule. If you can abide by this rule, there's a really good chance that, yes, you are going to have to graduate student loan debt. You're going to take it into the first few years of your career. But that's it. It's going to be there for the first few years, not for the first few decades.

• 7:03Speaker 03

  So you want to make sure that you do not accumulate more debt in student loans than you anticipate making in your first year.

• 7:09Brian Preston?

  All right. So that's student loans. Now let's talk about the next trap that I feel like a lot of people in this generation fall into. And this is the auto loans. Now, look, a lot of other content creators in the financial space will tell you just avoid auto debt.

• 7:24Speaker 03

  All together.

• 7:24Brian Preston?

  And we even say financially, you know, if you think about your auto debt, it really is financial napalm. This will blow up your finances because I feel like the typical American screws this up so bad. But we are unique in the fact that we actually say, look, I get it. And we have a no hypocrite policy. I actually had to get my first job. I needed reliable transportation. So it's unfair to tell somebody who's broke as a joke. I've been there when I was in my twenties. I had absolutely nothing to my name. I needed a good reliable car so I could start this journey because I was trading my time for money. And that money I was turning into investments and resources on the back end. But without the car, this engine falls apart. So we needed some boundaries so people could do this well.

• 8:07Brian Preston?

  And that's where we came up with what's called 238. And here's what's going to keep you safe. It allows you to get good. Transportation that's reliable, but doesn't let your ego, doesn't let you worry about what other people think how cool or not cool you are. And that's why we wanted this. So put down 20% down. This is going to help you on the front end. So you don't get beaten up by depreciation immediately. You want to pay it off within three years. This is going to blow a hole in what the whole auto industry is trying to do to with you because right now what they do is they say, what do you want your monthly car payment to be? And their game is they'll say, okay, we'll take you to a four-year, five-year, six-year, seven-year loan. And you can afford anything at $200 a month when you go out so far, but you never actually own the car. We

• 8:52Brian Preston?

  don't, we don't play those reindeer games. We cut you down at three years. So that way it keeps your car payment in check. And then we don't want those payments exceeding 8% of your gross income. And then we have two little caveats. This doesn't work for luxury cars. You have to pay same as cash on luxury cars. And we also don't want your car payment exceeding what your investments are so that we don't fall in that trap that we were talking about earlier with Gen Z. It was we don't want your car payment exceeding what's going into the Roth IRA. This is going to keep you safe.

• 9:22Speaker 03

  You know, this is a hot take. I don't even think the caveat should apply to Gen Z'ers because I think that where you start with your car matters. And if you're starting in luxury brands, you're likely getting it out of whack. Early on in your career, you should be focusing on what is reliable, what gets to me to my job. And I don't even think, again, hot take here, I don't even think luxury brands should be on the table for folks that are just starting out in their career. Even if they could pay cash for it, there's a really good chance that that cash, those hard-earned dollars could work a lot harder for you doing something else instead of buying a luxury automobile.

• 9:56Brian Preston?

  Save that disappointment for yourself later when you realize those, driving a luxury car actually has more headaches than you want. Believe me, I've been there, done that. Do the used reliable car in this stage of life.

• 10:07Speaker 03

  And then the third thing, the third area category that we think you should avoid is around credit cards. If you are someone, maybe you came through college, maybe you're early on in your career, and you have credit card debt and it's showing up on your balance sheet, make sure you pay it off right now before it becomes a bigger problem because it's one of those holes that the longer you let it sit there, the deeper it gets, and the deeper it gets, and the deeper it gets, and the deeper it gets. So if you have credit card debt, make sure you're paying them off every single month. Don't allow compound interest to work

• 10:40Brian Preston?

  Here's a positive stat that I think is not, it's not something we can say it's because of how awesome this generation is. I think it's more of a component of, they just didn't have enough time to screw it up yet. Is Gen Z actually has the lowest average credit card debt out of any other generation. But I just gave you the answer. I think it's because they're the youngest.

• 10:59Speaker 03

  That's right.

• 11:00Brian Preston?

  So they just haven't had the ability, youngest adults, I should say. So they haven't had the ability to go run up the money with the banks. And that's what leads us to the key point that Bo was just talking about. And we even have a slide for this, is that we say, using a credit card, credit card use is A okay. You get a check mark on that, but credit card debt, no way. If you're having to carry any balance, even, don't even get into the whole balance transfer game for 0%. All those things are traps. Just avoid credit card debt altogether. If you're not paying it off every month, you're really not a credit card person.

• 11:35Speaker 03

  Love it. All right, Brian, let's shift gears. Now, we talked about Gen Z. Let's move on to the next generation. Let's talk about millennials. These are folks that are aged 29 to 44. And what often happens in this passage of time is a lot of people enter into what we like to call the messy middle. It's this stage in this season where all of a sudden, the commitments that we have, and the things that we need to be doing, and the things that we need to be spending money on, begin pulling us in a thousand different directions. At the same time, we're getting pulled in all those different directions. Our disposable income is also increasing. We're likely buying houses, getting married, starting families, advancing in our career. All of these things are beginning to pull against us. And I think far too often, folks in this messy middle,

• 12:20Speaker 03

  they just begin reaching for the easy button. I just need to figure out, how do I bridge the gap in this difficult time?

• 12:26Brian Preston?

  This is like a country, country song lyric, in the fact that this really is the decade, or the period of time where you're short on time, you're short on money. So many things are going on in life that it's easy just to put financial decisions up on the shelf for a future time. And I'm here to tell you, that is a mistake. Yes, the days are long, but I promise you, those years are short. There's that country lyric that I'm telling you prioritize your financial decision making, even if you do feel like there's just not a lot of money out there because this is why it's important. You don't want to, you want to be an active, you want to be the lead hero in your story of life. You don't want to be just a supporting actor that just goes along to get along.

• 13:10Brian Preston?

  Because if you don't take an active role in your financial life, you will get left behind. And that's probably a great way to set up. Let's talk about what is actually going on for the typical millennial when it comes to debt.

• 13:21Speaker 03

  Yeah, again, let's look at it in categories. If we think about student loans, for all the millennials that carry a student loan balance, the average student loan balance is $33,500. Now, as we were looking through this, Brian, there was a stat that was, I don't know if alarming is the right word.

• 13:38Brian Preston?

  It's ugly and yucky.

• 13:39Speaker 03

  Sadening is the right word.

• 13:40Brian Preston?

  Yucky is the word that came to my mind. Yucky was definitely, because this is the messy middle. They got kids, they got spit up on them, they know what yucky looks like.

• 13:48Speaker 03

  Do you recognize that 63% of student loans right now outstanding that have a balance are either the same or higher than when the student loan was first issued? I'm gonna say that again, six out of 10 student loans that currently exist are larger now than when the money was actually borrowed. That means that what's happening with student loans is they're moving in the wrong direction. They are negatively amortizing, they are getting bigger, not getting smaller. I think a lot of folks in the millennial generation are seeing that be a reality. So that's student loans. Let's talk about auto loans, Brian. If you look at all the millennials that have an auto loan, average auto loan balance is higher than it was for Gen Z years, just under $26,000.

• 14:31Brian Preston?

  And that equates to a monthly payment of a little over $700, $735 a month. Bo, you made the point earlier on the previous generation, this is actually now bigger than what it takes to max out your Roth IRA.

• 14:44Speaker 03

  This is really close to almost $10,000 a year. That's not going to their arm or dollar bills, rather it's going to pay for a car. If you look at mortgage debt across millennials, the average mortgage debt for millennials that carry a mortgage, $306,000.

• 15:00Speaker 03

  And the average credit card balance for millennials that are carrying a balance, $7,600. This is double what it was for their Gen Z counterpart. So it makes me nervous that millennials are not recognizing how devastating credit cards can be.

• 15:15Brian Preston?

  Well, I think a lot of people will see that stat and be like, okay, $7,500. That doesn't sound so horrible. It's less than $10,000. But when you start thinking about a lot of these credit card companies are charging you between 20 to 30% interest rates on this, you quickly realize, man, this is thousands of dollars a year of lost money. And if you go look at our wealth multiplier and look at it through those lenses of, man, what could this money be? What's the opportunity cost? You'll quickly start realizing your consumption is destroying your future financial self.

• 15:46Speaker 03

  So if we add all of these up, we think about what's the average debt balance for a millennial? This is across both millennials that carry debt and those that don't carry debt. The average debt balance is almost $63,000. Again, this is a stage of people that are mid-career that should have their debt decreasing, not increasing, and yet the numbers, the averages, tell us something very different.

• 16:09Brian Preston?

  Well, this leads to, because we gotta get you out of this. So here's how to avoid some of these pitfalls. The first thing, this is going to seem a little contrarian, but we did this on purpose. Is we've told you in your 30s, you really are in this messy middle where you got a lot of things pulling at you, and you're going to have student loan debt. We just went over those numbers. But a lot of these student loan numbers, the interest rate is actually quite reasonable, especially if you're old enough that these are loans that came out and they're less than 5%. Don't get in a hurry paying all these, the student loan debt off and not funding Roth IRAs, not funding other things, because you gotta start building while you have a huge wealth multiplier, where every dollar has a chance to grow on itself many times over.

• 16:53Brian Preston?

  You gotta get to work while you're in this crucial stage of life. And sometimes people are just so excited to pay off all debt because they paid off the credit cards first, that they pay off some of these low interest debts at the expense of their future self.

• 17:05Speaker 03

  Yeah, not all debt is high interest debt. So one of the things that you have to be able to discern in your 30s is what qualifies as high interest and what qualifies as low interest. If it's low interest, perhaps it does not need my attention. If it's high interest, perhaps I should satisfy it. So that's student loans. Let's talk about mortgages, Brian. One of the things I think that is so tempting, again, this is that stage of your career where you're beginning to get some traction, maybe beginning to have some success. And it becomes really, really enticing and really, really exciting to think about, oh, I'm going to upgrade. I'm going to get into more house. I'm going to increase what my living situation looks like. But far too many millennials find themselves in the spot where now

• 17:44Speaker 03

  they are house rich, but life poor. All the wealth that they have, all the resources they have are now tied up in their primary residence.

• 17:53Brian Preston?

  That's why, Bo, we came up with a rule, just like we have a car buying rules. Why wouldn't we have a house buying rule too? So we have three, five, 25 rule. And what this does, we are one of the few content creators in the financial space that we recognize. Look, that first home purchase, just to get on the home ownership train, people aren't putting down 20%. We didn't have to change this post inflation, you know, and all the other things that came out after the pandemic. We already had this rule because this is what we resembled.

• 18:19Speaker 03

  That's right.

• 18:19Brian Preston?

  A lot of our financial advisors resembled this. A lot of our clients resembled this. You only have to put down three to 5% on the first home purchase. And that's only on your first. When you upgrade to the second house, you are going to need to put down that traditional 20%. We need to make sure that you're in this home at least five years. There's too many friction and transaction costs to make this something that you're burning and churning through homes. It just doesn't work that well. And then we want to make sure that, once again, you are not house rich, life poor. That's why we try to keep your monthly cost below 25% of your gross income. So that you can actually have some money to live life, save for the future and live your best financial life.

• 18:59Speaker 03

  So obviously, houses are probably one of the most expensive things that you're going to buy, especially in this decade. But another thing you're likely going to do is buy a car. Now, we've talked about for Gen Z's. It's really about just having reliable transportation. I need something that can get me from point A to point B. But there is a chance in the messy middle in this next season and stage, you need a car for a different reason. Maybe your family is growing. Maybe you have a longer commute. Maybe you fill in the blank on the reason that you need to change the vehicle that you're driving. If you're going to be in that situation, if you're going to make that decision, we want you to understand what can you actually afford because it's very easy to justify. Oh, I need the bigger car. I need the safer car. I need this.

• 19:41Speaker 03

  And all of a sudden you begin making those small little decisions to make the car more and more and more and more expensive. So we want to make sure that when you do upgrade, you stay inside of your affordability. So we want you to go to moneyguy.com/resources. We actually have a car buying calculator that tells you, hey, based on where I am, based on what I have going on, this is how much car I should consider buying. If you can use the tool and keep that reined in, you're going to prevent yourself from having all of your dollars going towards an automobile that's going to depreciate over this decade.

• 20:15Brian Preston?

  I think you're being too nice. I'm going to give a little more tough love here. So look, I look over my life and I say, okay, when was a nice car like a social currency that I see people making huge mistakes? And I think about high school, when you saw the parents that gave their kids way too nice of a car for high school. And yes, in the moment that gave some temporary social status to the high school kid. I liked when I got to college, it was okay that I had a beater or a character builder. And I realized that a lot of students really didn't care what car you drove in college. And I was like, good, we're finally out of that dysfunctional thing that happened in high school. And little I know, when you get in your 30s and you start having a growing family, no, that social thing that, and I don't know if it's the ad agencies and everybody telling you what you should and shouldn't do,

• 21:01Brian Preston?

  and they're totally misleading you is, and I'll tell you what I know about this. When I was buying my wife's most recent European SUV. I saw multiple 30 something families there with these tricycle motors, looking at these same luxury vehicles. And I'm like, what are you people doing? You don't need to be here. You need to be buying reliable transportation that fits in 238, assuming, because they're not paying cash. And if you're not paying cash for these luxury cars, you are already blowing up 238. But don't let yourself get trapped in that. I think that's where, that's the tough love, Bo, is I don't want somebody, you did so good in your twenties, you get in your thirties, and just

• 21:42Brian Preston?

  because the kiddos are now riding in this car, realize they're going to be, you know, tearing up chips and crackers. You don't want luxury cars for those vehicles anyway. Don't fall into that trap.

• 21:53Speaker 03

  I think another thing that happens, obviously, the automobiles are a thing that becomes exciting and enticing during this stage. But I think just lifestyle creep in general is a real thing that takes place. And in your thirties, in this millennial generation, it becomes very, very tempting to try to keep up with the Joneses. And I think that's one of the reasons why we see the millennial credit card balance increasing. I've got all these different things pulling me in all these different directions. So what do I do? I swipe and I carry a balance. I swipe and I carry a balance. Make sure you're not letting your lifestyle creep outside of what you can actually afford on a month to month basis.

• 22:32Brian Preston?

  Faking it until you make it is actually a failure when it comes to finances. And I think a lot of people, that's the life they live. They'll think I'll just catch it up. I'll make more money. I'll be up. No, you're losing out on the time. You're losing out on the opportunity. Don't fall into that trap. That's why I don't let lifestyle creep own you. Remember, this is, this is go back to the basic. We are A-OK with credit card use. Credit card use is A-OK because there's a lot of benefits. Sometimes with, you know, financial transactions, buying stuff online, you're going to be glad you have a credit card. So credit card use is A-OK. Credit card debt, meaning carrying a balance, not paying it off every month, that is a no way moment. You no go. Don't fall into that trap because if you're paying a financial institution 20 to 30%, you'll never get ahead.

• 23:18Speaker 00

  This episode is brought to you by Indeed. You're ready to level up your business, but the pressure to find the right person to make that happen is intense. Indeed sponsored jobs can help carry the load. It boosts your job post to help it reach quality talent fast. Cut through the chaos with Indeed sponsored jobs. Get a $75 sponsored job credit at indeed.com/podcast. Terms and conditions apply. Hiring now? Then this is a job for Indeed sponsored jobs.

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• 24:47Speaker 03

  All right, Brian, we've talked about Gen Z, we've talked about millennials. Now let's talk about your people. Let's talk about the Gen Xers. These are folks from age 45 to 60. Now, this is what you would expect. You would expect for folks at this age, in their late 40s and 50s, you'd expect student loans to be almost gone. You would expect that they're likely paying cash for their automobiles now.

• 25:11Brian Preston?

  You would think.

• 25:12Speaker 03

  Their mortgage balances are going down because they're extinguishing that debt.

• 25:16Brian Preston?

  They're over 45, so they could.

• 25:18Speaker 03

  And you would think that credit cards are no longer an issue. That should not be happening. However... In reality, the situation looks a little bit different.

• 25:26Brian Preston?

  Remember, we're not talking about financial means. We're talking about the average American. And unfortunately, those stats look a lot different. Student loan debt, this one blew my mind. Average student loan debt for those that still have student loans is right under $46,000. Here's another shocking stat. The average account age, because I was like, man, maybe this is just the kids. You know, we are old enough, we have kids in college. No, listen to this stat. The average account age is 384 months. That means that these Gen Xers have had student loan debt on average for 32 years.

• 25:57Speaker 03

  That's unbelievable.

• 25:57Brian Preston?

  That doesn't even seem like that should be part of our reality.

• 26:00Speaker 03

  So that is not where you want to be. When we look at auto loans, the average auto loan for a Gen Xer, $28,000. That equates to a monthly payment of $839 a month. And you may be wondering, okay, well, how, how is this happening? By, by the time you're at this stage, hopefully you've begun paying off these cars. Well, I think what a lot of Gen Xers do is they buy a car that they can't afford. They stretch out the term for longer than they should, and they just roll that negative equity in.

• 26:29Brian Preston?

  We're stacking bad decisions. We're stacking nicer cars. We're stacking unpaid for cars with that negative equity. This is a disaster. Guys, if you're in Gen X, you should be paying cash. I think it's actually, just like, you know, if you go to college and you struggle with a subject, they make you do remedial classes to kind of get caught up. I think if you're a Gen Xer and you can't pay cash for cars, then you need, you're buying too nice of a car. This should be the generation that you're paying cash for the vehicle. If you can't, you're buying too nice of a car.

• 26:56Speaker 03

  When we think about mortgages, the average mortgage balance for Gen Xers that have a mortgage is about $264,000. And the average credit card balance for a Gen Xer that carries a balance month to month is just over $10,000. So when you add all of this up and look at all the folks from age 45 to 60, the average debt load for a Gen X individual in this country is just a hair under $70,000. Not moving in the right direction.

• 27:25Brian Preston?

  It's kind of indicting a little bit for my generation. Does it, does it make you feel good for, for what the next 15 to 20 years looks like? But, but let's talk about how we avoid these pitfalls. We are glass half full optimist. Here's the first thing on mortgages. Now, this is a little contrarian. I'm all about paying, you know, y'all know I paid off my mortgage in the last year. And I like telling people, even in Millionaire Mission, I told people, hey, once you're over 45 and you're in a great place financially, you have our full permission to get crazy paying off that debt. However, a lot of you need to put the work in. You don't, you can't be a debt crusader unless you're actually ahead of the curve on saving for retirement,

• 28:05Brian Preston?

  building up assets. Cause what I don't want, we know that close to, I think it's around 78, 79% of you have mortgages that are less than 5%. And I don't want people paying off low interest debt in a very aggressive fashion when they're still not even saving for the future. Cause by, by the way, we're running out of time for compounding interest to do any of the heavy lift for us.

• 28:26Speaker 03

  Another thing we want to make sure that if you are in this stage and maybe you are doing some things right and making some sound financial decisions and having some success and you're thinking, okay, well now I want to upgrade to the next house. I want to move into the next home. We say that when you buy your first home, we love, we love applying the three, five, 25 rule. But when it comes to buying your second home, your upgrade, 20% is a must. So if you're thinking about buying another home, but you do not have 20% that you can put down as a down payment, we would argue that you cannot afford that home. So now let's talk about auto loans, Brian, because again, I think one of the pitfalls you can avoid so that you don't fall into this negative equity trap

• 29:05Speaker 03

  is if you buy a car, whether you're buying a new car, whether you're buying a used car, if you can aim to drive it for seven to 10 years, you're going to stave off the negative thing that most Americans fall into.

• 29:16Brian Preston?

  I don't mind being the heavy here. I think on auto loans for this generation, 40s and 50s, I want you paying cash for most of these cars. Cause you should be at the point of discipline that you can do this. And for sure on luxury vehicles, if you're in step eight of the financial order of operations, has to be same as cash. I don't want you getting caught up in, I can finance it this way. There's just, there's, debt is not good for you, especially on automobiles. This ought to be something that gets you from point A to point B, unless you're really conquering the game of life.

• 29:47Speaker 03

  Now, this one is pretty frustrating. When we think about credit cars as it relates to Gen Xers. Gen Xers have the highest average credit card balance of any of the other generations. Higher than Gen Z's, higher than millennials, higher than baby boomers. So something has gone awry. And I would argue, if you're someone out there between the ages of 45 to 60, and you've not yet figured out, I can't carry a balance, it's going to work against me, credit card debt is chainsaw dangerous, then perhaps you're just not a credit card person.

• 30:16Brian Preston?

  Yeah, you need to teetotal it.

• 30:18Speaker 03

  That needs to cut it up and not use it because we know that when it comes to credit cards, it is fine if you use them, it is not fine if you carry a balance. And at this stage, if you're a Gen Xer still carrying a balance, perhaps you should get rid of your credit cards altogether.

• 30:35Brian Preston?

  Yeah, I mean, I seriously, tough love is necessary when it comes to credit card debt at this age because you can't afford to pay 20 plus percent when you're just hoping to build assets for your own retirement and financial independence.

• 30:47Speaker 03

  All right, Brian, let's talk about this next stage. These are the baby boomers, these are the folks that are at retirement or nearing retirement or in retirement, ages 61 to 79. And the goal is you should be debt free and financially independent and in a great financial spot. But the unfortunate reality is a lot of Americans do not find themselves there. When we think about average debts for this age range, student loan debt for baby boomers is still, on average, for those that carry a balance, $48,000.

• 31:20Brian Preston?

  Now, look, some of this is from their kids, but it's still crazy to me that the average account age in this category is 328 months, which is 27 years. So we are just living a lifetime of student debt. That is a curse in your household if you're not getting this under control at this stage of your life.

• 31:39Speaker 03

  When it comes to auto loans for folks in this generation, the average auto debt for a baby boomer, $24,000 a year. That's a monthly payment of $574 a month. You already said this for Gen Xers, Brian. At this stage, this should be an all cash stage. When you buy a new car, you should not be carrying a balance. And yet, the average American is in fact doing that.

• 32:02Brian Preston?

  And then mortgage debt, I mean, I'd even say in this, we want them to be completely debt-free at this stage. And you see, it is getting smaller from other generations, but it's still over $200,000 of mortgage debt, even for those that are greater than 60 years of age.

• 32:16Speaker 03

  And when it comes to credit cards, the average credit card balance for baby boomers that carry a balance, it's a little over $8,100. So if you add all of these debts up across all of the baby boomers out there, the average debt load for a baby boomer right now, still $56,000. Ryan, I would love to see this be a zero number by this stage of life, and yet many Americans are not there.

• 32:39Brian Preston?

  So let's quickly tell the boomers how they can avoid these pitfalls. Mortgages, look, guys, are you truly financially independent if you have an obligation of a mortgage? I would say I don't think so. So I would really strongly encourage you, let's take steps. The wealth multiplier is just not that big anymore at this point. So let's get those dollars to pay off debt so that you can own your life and own your time that much sooner.

• 33:04Speaker 03

  When it comes to auto loans, you should be paying cash for cars. At this age, at this stage, we do not want you financing automobiles anymore. I want you to figure out how can you pay cash so that you are completely unencumbered on your automobile?

• 33:17Brian Preston?

  And then let's talk about credit cards. You know, look, I've made the statement, credit card use is A-OK, but credit card debt, no way. If you are a boomer with credit card debt, you're just not a credit card person. Take it, take it for what it is. You just don't have the discipline. This is not a tool that has worked well for you. So maybe you need to go the teetotal way. I think this is, these are things that's concerned me because a lot of our audience, you're not boomers and you're not even Gen Xers like me. A lot of our, majority of our audience are the millennials and the zoomers or the Z's. You guys have the opportunity, you ought to fall in these traps. And this is what I need everybody to hear. How your journey started does not help to define how it ends.

• 34:01Brian Preston?

  You actually get to be the hero of the, of your own financial story. Just don't let some marketing firm that's out there trying to push this consumption system. Society on you. I want you to break through that. That's the biggest thing that people can do to better yourself, take control, be an active participant in your financial life. Bo, where else? What else should people do? Where should they go to make sure that they're on the right path?

• 34:28Speaker 03

  Yeah, we believe there's a better way to do money. We believe it so much. We have an entire website, moneyguide.com, dedicated to helping you do money better. We have tons of calculators, tons of resources, tons of free stuff for you to take advantage of. Go to moneyguide.com/resources and you can check all of those resources out.

• 34:46Brian Preston?

  It's worth repeating. How your journey started does not define how it ends. I'm your host, Brian, joined by Mr. Bo, Money Guy team, out.

• 34:56Speaker 03

  The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss.

• 35:29Speaker 05

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