You Want Financial Freedom? Rid Yourself of Debt.

(Last Updated On: March 19, 2017)

I have previously written about my concerns re: consumer debt levels here and here. While I don’t like to harp on the negative, I can’t help but become increasingly concerned when I read that Deutsche Bank’s chief international economist who has been staunchly bullish on the economy for quite some time is now talking about the following two downside risks to the US outlook:

  • the US has already experienced a very long recovery
  • credit quality is deteriorating

Rid Yourself of Debt

Then I read the February 17, 2017 edition of the New York Fed’s latest quarterly report on credit! In this report I see that:

  • household debt totaled $12.58 trillion as of December 31, 2016, an increase in total debt of 1.8%, or $226B in Q4 2016.
  • household debt is just 0.8% below the peak reached in the Q3 2008 when the US economy was in the midst of a recession.
  • Americans borrowed the most money since the recession to pay for new houses or to refinance their mortgages
  • as of December 31st, 4.8% of outstanding debt was in some stage of delinquency and of the $607B of delinquent debt, $412B is at least 90 days late or “severely derogatory”.
  • about 204,000 consumers had a bankruptcy notation added to their credit reports in Q4 2016.

I recognize the number of consumers who had a bankruptcy notation added to their credit reports was 4% fewer than in Q4 2015. That, however, is small consolation for the not so fortunate 204,000.

Have a look at the report. You will find a series of interesting charts. When you look at those charts, try to visualize how they would change if interest rates start to tick upwards. I don’t get a pretty visual!

The Audi Generation and How It Will Ruin Retirement for Boomers

I find it fortuitous to have come across the statistics reflected above the day after I received an email from Kurt Rosentreter, CPA, CA, CFP, CLU, TEP, FMA, CIMA, FCSI, CIM a Senior Financial Advisor, Manulife Securities Incorporated and a Certified Financial Planner and Life Insurance Advisor, Manulife Securities Insurance Inc.. My wife and I have known Kurt since 2002. Back then he prepared a comprehensive game plan for us to follow so as to become financially free.

Some people will go through the exercise and expense of having a comprehensive financial plan crafted for them only to look at it once or twice. Not me! I have never told Kurt this but I have I quickly reviewed that plan at least twice a year to make sure I was doing what I committed to do.

I really have to chuckle when look at the investment statements we provided him for the purpose of putting together that plan years ago. What a dramatic improvement our net worth has experienced in just over 14 years!

In Kurt’s February 17, 2017 email to me was the enclosed enewsletter “The Audi Generation and How It Will Ruin Retirement for Boomers.” In it he talks about a generation of white-collar professionals in North America where individuals or couples with substantial incomes never know what it feels like to have to budget money. I won’t give away anymore. Just read it!

The Audi Generation and How It Will Ruin Retirement for Boomers