New York has the fourth highest houshold debt in the nation, with average debt climbing to $53,830 at the end of 2021, according to a recent report by New York State Comptroller Thomas P. DiNapoli. National household debt totaled $15.6 trillion with New York households accounting for $869.4 billion, or 5.6 percent, of that. That places the Empire […]
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New York has the fourth highest houshold debt in the nation, with average debt climbing to $53,830 at the end of 2021, according to a recent report by New York State Comptroller Thomas P. DiNapoli.
National household debt totaled $15.6 trillion with New York households accounting for $869.4 billion, or 5.6 percent, of that. That places the Empire State fourth behind California, Texas, and Florida.
Mortgage debt makes up the vast majority of household debt at $601.2 billion in New York and $10.9 trillion nationally. The state’s debt ratio (consumer debt in relation to income) is 57 percent, compared with 73 percent for the nation.
Debt is almost a way of life in America, says Aaron Evans, a senior financial advisor at Strategic Financial Services in Utica. “We’re almost encouraged to do it as a society,” he notes.
While debt did decline during the height of the pandemic, it has returned vigorously as pandemic restrictions relaxed, and people started spending again. Initially, Evans says, asset values were high and interest rates were low, creating a perfect storm to increase debt loads.
Now with a potential recession looming, Evans expects to see spending and debt increases plateau and even start heading the other way as interest rates rise.
On average, New Yorkers have lower mortgage and auto-loan debt, but higher credit card and student-loan debt, according to the report. Per-capita credit-card debt is $3,520 in New York with credit-card balances making up a larger share of debt in the state (7 percent) than nationally (5.5 percent). With substantially higher interest rates than other types of household debt, higher credit-card balances can be indicative of financial stress when used for routine expenses, the report noted.
Evans believes the report is skewed in part by New York City, which is a more expensive place to live than the rest of the state but doesn’t believe it’s doom and gloom as most debt can be managed with a good plan.
“The more debt you have, the less flexibility you have,” he says. Financial advisors suggest that household debt total less than 30 percent of household income.
“It’s just a good reminder if you’re over-levered, you could be in trouble,” he says of the comptroller’s report.
Those looking to pare down their debt should first tackle paying off their highest-interest debt, which is usually credit cards, Evans says. After that, he suggests people focus on building up a small cash reserve for emergencies and utilizing things like employer matches to 401(k) contributions to build up retirement savings.
“In most cases, you need to have a strategy because most debt doesn’t go away,” Evans says.
According to the comptroller’s report, New York’s delinquency rate of 2.1 percent for consumer debt exceeds the national average of 1.9 percent but is lower than the 3.8 percent it was before the pandemic. Credit-card debt had the highest share of delinquent accounts at 8.9 percent. The state’s delinquency rate of 0.9 percent for mortgages is nearly double the 0.5 percent national rate.
The report is part of DiNapoli’s ongoing financial literacy initiative to provide more robust financial education and give New Yorkers the tools they need to manage their finances. The report uses data on consumers with a credit report from the Federal Reserve Bank of New York to examine household debt in relation to the national average and large peer states.