Career Advice, Global Insights, Leadership, Risk Management

The Data on US Debt: Measurement and Management

19 Oct , 2016  

“If you can’t Measure it, you can’t Manage it. ”   – W. Edwards Deming

Each year, as a service to our students here at Northwestern University, I hold a special session showing new graduates how to make a personal financial plan. If you are not measuring your personal finances, you are not managing your personal finances. Of course, there are some that roll their eyes and by the end there are many eyes that pop wide open in disbelief. The shocker is that even with that $130,000 job, after student loan debt, outrageous rent in San Francisco or New York, daily Starbucks’ coffee, and some minor retirement planning, it is likely that our well-employed, hard-working, graduate is playing with only about $10-$25 in uncommitted disposable income. Do the analysis sometime! You probably have less uncommitted money than you thought. It can be depressing, but I don’t mean it that way. The challenge and risk is that one can easily be in constant debt without a plan. Still, $20 dollars saved each day over a life time (and invested) can easily reach into the millions. Why is uncommitted income important as a metric? It is the amount that we can use for special interests and the future. Think of it as a surplus. Financial surplus allows people to buy homes, start families, start businesses, take vacations, and accomplish the many goals in their lives. My message is about helping our graduates build a plan for just that. Grow your surplus and manage your debt and lifestyle to have surplus.

With our current presidential election mired in many levels of drama and discontent, I thought it would be useful to reflect on the same financial analysis for the US, overall. The non-partisan, non-political website, has an excellent “dashboard” on the financial metrics of the US debt obligations. It is staggering!

Some details that should be part of financial planning:

  1. The US Debt is $19.7 trillion (as of Oct 19, 2016). With each taxpayer owing over $165,000. How big is this? Consider that the median household income is just north of $51,000 and per capita income is just above $30,400. A median family would have to work many years just to pay this share. As with my exercise for the students, we are not counting all obligations.
  2. Americans owe $17.8 trillion in personal debt. The largest part is mortgage debt at over $14.1 trillion. Student loan debt (another American tragedy about to unravel) is over $1.3 trillion, swamping credit card debt, which is a mere $983 billion.
  3. Of course, there is more. If you live in indebted states and cities (like Florida, Texas, Illinois, California, or New York), there is much, much more debt.

In short, Americans (through personal, federal, state, and local debt) owe over $66.5 trillion. This is over $800,000 per family. The liquid funds available per family is not quite $9,500. That is our savings or surplus.

We have wealth in America, too. The value of our businesses, homes, and personal assets is estimated at over $123 trillion, and many of those assets have taken generations to build. Assets per citizen are about $381,000, but probably you know many who have less than that and some who have more than that.

We have 324 million Americans. The following statistics are powerful with that population in mind. Ponder that:

  1. 43 million Americans live in poverty
  2. 31 million still don’t have health coverage
  3. 162 million are receiving US benefits, yet there are only 119 million taxpayers
  4. 23.5 million government workers (more than the population of Florida or New York)

And we have to make a plan to do this with our annual $18.5 trillion in GDP. It seems there should be a way, no different than for the students in my class.

We should be looking more at these numbers and building a plan for the future. Measure it and manage it! We should also be asking our governments (federal, state, and local) and challenging the existing political parties to build financial plans to resolve this.

Note: All data is of October 19, 2016.

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By  -      
Russell Walker helps companies develop strategies to manage risk and harness value through analytics and big data. He has done novel research in data monetization and digital disruption and advises leading firms on these topics. As Director of Experiential Learning in Analytics and Associate Teaching Professor of Marketing and International Business at the Foster School of Business, at the University of Washington, Dr. Walker is an academic thought-leader on analytics. Russell Walker has developed and taught leading executive programs on Big Data and Analytics, Strategic Data-Driven Marketing, Enterprise Risk, Operational Risk, and Global Leadership. Previous to moving to Seattle and the Foster School, Dr. Walker was Clinical Professor at the Kellogg School of Management of Northwestern University, where he founded and taught many popular courses in analytics and risk management. His is the author of the book From Big Data to Big Profits: Success with Data and Analytics (Oxford University Press, 2015) which examines data monetization strategies and the development of data-centric business models in the new digital economy. He is also the author of the award-winning text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management as a competitive advantage. Dr. Walker consults with firms on the topics of Big Data and Analytics, Data Monetization, Risk Management, and Business Strategy. Russell Walker can be reached at: @RussWalker1776

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