Family Debt Lowest In Six Years

Last year, family debt fell to its lowest point in six years, and marked the second year in a row that it fell overall.

Household debt, which includes credit card debt and remaining mortgage balances, fell to $13.4 trillion, the Federal Reserve said. Families are in a much better position than in previous years, as the debt percentage in disposable income dropped recently to 116 percent from 2007, when it was 130 percent.

Much of the lowered debt totals is likely linked to the numerous write offs seen in the last year, which has led to affected consumers having lower credit scores. However, another key factor is that people are simply spending less, making it easier to put money toward bills.

Now that debt levels are starting to get on the road to recovery, some believe that spending will rise, helping to stimulate the economy.

Joseph Carson, an economist for AllianceBernstein, told the news source that there has been an improvement in family budgets, and because of this, consumers may become less timid about their spending habits.

The recession, which began in 2008, has ended, and many aspects of the economy have shown signs of improvement over the past few months.