Data on Household Income and Debt Paints Mixed Picture

The latest Federal Reserve figures on income and debt in U.S. households paints a mixed picture.

The good news: the average American who has a job now has an after-tax income that's higher than it was pre-recession. The average American is also spending a smaller percentage of his income paying off debt.

The bad news: his amount of debt is still the same. The decline in the average American's income-to-debt ratio is the result of higher income, not smaller debt. Furthermore, that debt is most likely a combination of student loans and credit card debt. Pre-recession, that debt was more likely to be a mortgage.

The takeaway lesson? No matter how much you earn, focus on keeping your debt low, and make a special effort to avoid credit card debt, which carries high interest.

For more on managing your money, check out these budgeting worksheets or learn how to be a millionaire.

Source: The Wall St. Journal.

Source: http://budgeting.about.com/b/2012/03/08/data-on-household-income-and-debt.htm

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