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Northwestern Mutual Reports Shows Declining Debt

The 2021 Planning & Progress Study from Northwestern Mutual is highlighting a trend towards financial stability after several years of turmoil because of the coronavirus pandemic. The new report sees overall debt down, with most respondents in some stage of economic recovery. Here are the key findings of the report:

Northwestern Mutual Report Shows Shrinking Average Personal Debt

According to Northwestern Mutual’s 2021 Planning & Progress Study, American adults are carrying lower non-mortgage debt levels than in previous years. The new study shows that the average U.S. adult over 18 holds an average of $23,325 outside of their mortgages. In comparison, in the 2020 study, the average non-mortgage debt was $26,621, and in 2019, it was $29,800.

The trend towards lower personal debt can partially be attributed to the coronavirus pandemic. One-third of respondents (32%) said their financial discipline has improved during the pandemic, and 95% of that group say they expect their newfound habits will stick after the pandemic subsides.

The study found that new financial behaviors include:

  • Reducing unnecessary expenses (canceling unused subscriptions, dining out less, etc.) – 45% of respondents
  • Paying down debt – 34% of respondents
  • Investing more – 33% of respondents
  • Increasing retirement contributions – 25% of respondents

Credit card debt is one of the leading types of personal debt. Cardholders have benefited from a variety of efforts during the pandemic, including payment forbearance and credit card relief. Additionally, interest rates have remained at near-record levels, thanks to the Federal Reserve holding borrowing rates at 0.25% for over a year. These factors have helped Americans pay off credit card debt at a record pace.

Not All Good News for Millennials and Gen Z

Despite the decrease in non-mortgage personal debt, the Northwestern Mutual report isn’t all good news. Many Americans are finding their financial goals on hold because of COID-19, with 18% being forced to delay retirement savings because of debt and 14% putting off buying a home. Both Gen Z and Millennials have been hard hit by the pandemic, with 63% and 65% respectively saying COVID-19 and inflation have halted their financial plans.

Of those who have experienced significant hardship, the majority (81%) say they are in some form of financial recovery.  Thirty-four percent of respondents say they are in “late-stage recovery” – meaning they suffered losses but have mostly recovered to pre-pandemic levels and are feeling confident in their ability to achieve long-term financial security. Additionally, 47% say they’re in “mid-stage recovery” – meaning they suffered losses and have begun making up ground but have not yet reached pre-pandemic levels and remain optimistic about their ability to achieve long-term financial security.

Related Article: Coronavirus and Credit Card Debt: Millennials Hardest Hit Financially

Featured image by Northwestern Mutual
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Cory Santos

Cory is BestCards.com's "Jack of all trades" and resident credit expert, covering all facets of the credit card space. In addition to credit cards, Cory finds that jogging, cats, and memes are essential parts of a balanced day.