The numbers are in, and the Federal Reserve tells us that total household debt for 2010 hit the lowest level since 2004, as the WSJ reports.
While this is good news – - a broad reduction in household debt is another brick in the foundation upon which the recovery will be built – household debts (which include mortgages and credit cards) still total more than 116% of disposable income, which is higher than the less-than-100% level many experts consider ideal.
And of course, over half the drop in debt did not happen the old fashioned way of earning more and spending less:
“Defaults on mortgages and credit cards played a large role in bringing down household debt, underscoring the extent of the financial distress still afflicting U.S. families. Commercial banks wrote off $118 billion in mortgage, credit-card and other consumer debt in 2010, the Fed said.”
How about you? Does your household owe more, or less than this time last year? If you reduced debt, how did you do it?