Around 23% of Americans are debt free, according to the most recent data available from the Federal Reserve. That figure factors in every type of debt, from credit card balances and student loans to mortgages, car loans and more.
The exact definition of debt free can vary, though, depending on whom you ask. For example, some people don’t count mortgages because they are viewed as “good debt” by creditors, since they are secured by the property itself. It may be helpful to look at the percentage of people who hold different types of debt in order to get the full picture.
| Type of Debt | Americans With This Type of Debt |
| Credit card balances | 45.4% |
| Debt secured by a primary residence (mortgages and related loans) | 42.1% |
| Vehicle loans | 36.9% |
| Education loans | 21.5% |
| Other installment loans | 10.5% |
| Debt secured by residential property that’s not a primary residence | 4.7% |
| Lines of credit not secured by residential property | 1.5% |
| Other debt | 5.2% |
Source: Federal Reserve data
Americans owe a lot of debt in general – over $17 trillion. Because there are so many types of debt, and debt is usually necessary for big things like owning a home or going to college, very few people are totally debt free. However, having some form of debt isn’t always a bad thing. A mortgage allows you to own your own home long before you’d have the money to do so, for example. And having some sort of debt is actually good for building credit – as long as you make your monthly payments on time and don’t borrow more than is manageable, your credit score will benefit.
Still, you should absolutely try to minimize unnecessary debt. For example, while it’s great to have a credit card, it’s not ideal to carry a balance on one unless you have an introductory 0% APR, as interest is expensive. You should try to pay your balance in full each month. In addition, you should avoid predatory loan types like payday loans and auto title loans that are extremely expensive.
How to Become Debt Free
- Assess Your Debt: List all your debts, including interest rates and minimum payments. This will allow you to take stock of your situation and prepare you to get organized and create a debt payoff plan.
- Create a Budget: Outline your income and expenses to understand where your money is going. After determining how much of your income you need to put toward non-debt expenses, decide what portion of the rest you are willing to put toward paying off your debt. You should also cut out any unnecessary expenses and redirect that money toward your debt. Then, track how you use your money and stick to your goals. You can learn more about how to budget on WalletHub.
- Build an Emergency Fund: Ideally, you’ll want enough money in the fund to pay for 3 to 6 months of expenses. You don’t have to wait until the emergency fund is entirely built to start paying down your debt, but you should put some money toward it each month.
- Choose a Strategy: Focus on paying off high-interest debt first (avalanche method) or the smallest balances first (snowball method). The first strategy will get you out of debt more quickly, but the second one can help keep you motivated by allowing you to meet individual milestones faster. You can learn more about the best way to pay off debt on WalletHub.
- Increase Your Income: If possible, find additional income sources like a part-time job or investments.
- Use Windfalls Wisely: Put unexpected money like tax refunds or salary bonuses toward your debt.
- Avoid New Debt: Resist the temptation to take on additional debt while paying off current obligations. The exceptions to this are if you use a balance transfer credit card or debt consolidation loan to put your debts in one place and lower your interest rate. Still, stick to the budget that you made and don’t make frivolous purchases.
- Use the Island Approach: The Island Approach is when you use different credit cards for different types of transactions. It emphasizes keeping your everyday expenses separate from other types of balances like balance transfers and purchases that won’t be paid in full, so you can maximize the effectiveness of your payments and accrue as little interest as possible. Most importantly, you should strive to pay your everyday expenses in full each month.
- Seek Professional Help if Needed: Consult with a financial planner or debt counselor if you need assistance.
- Stay Committed: Understand it's a gradual process, and stay committed to your plan. Celebrate small victories along the way.
- Review Regularly: Regularly review your budget and debt payoff strategy, making adjustments as necessary.
By following these steps, you can work methodically toward becoming debt free. It's a challenging journey, but with discipline and determination, it's achievable. You can learn more about how to pay off debt on WalletHub. You can also take advantage of free tools such as WalletHub’s credit card payoff calculator and mortgage payoff calculator.
This answer was first published on 08/25/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
Living debt free: 54.2% Living comfortably, but not necessarily being rich: 50% The ability to regularly meet all of their financial obligations and still have some money left over each month: 49.3% Never having to worry about money: 46.2%
What percentage of Americans are completely debt free? ›
The study found that six in 10 people could not cover three-plus months of expenses. Thirty-one percent said they had no emergency fund. It's no wonder just 23% of Americans say they live debt free, according to the Federal Reserve.
What percent of Americans have $1000 in savings? ›
Key Takeaways. More than one in four Americans (28%) have savings below $1,000. This is the case for 32% of Gen Zers, followed by Millennials at 31%, Gen X at 27% and Baby Boomers at 20%.
What percentage of Americans have no emergency savings? ›
Nearly one in three (30 percent) people in 2023 had some emergency savings, but not enough to cover three months of expenses. This is up from 27 percent of people in 2022. Note: Not all percentages total 100 due to rounding. Also, nearly one in four (22 percent) U.S. adults said they have no emergency savings.
What percentage of Americans carry a credit card balance? ›
Federal Reserve data showed that fewer than half (47%) of credit cardholders carried a balance at some point in 2023. That's down a percentage point from 2021 and 2022 but is down even further from 2020, when that rate was 50%.
What percentage of Americans are financially free? ›
22, 2023 /PRNewswire/ -- Despite most Americans having modest expectations of what it means to attain financial freedom, just 1-in-10 (11%) report they are living their definition of financial freedom, according to a new survey by Achieve, the leader in digital personal finance.
What percent of Americans live paycheck to paycheck? ›
How Many Americans Are Living Paycheck to Paycheck? A 2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck, a 6% increase from the previous year. In other words, more than three-quarters of Americans struggle to save or invest after paying for their monthly expenses.
How much does the average person have in their bank account? ›
The median transaction account balance is $8,000, according to the Federal Reserve's Survey of Consumer Finances (SCF), with the most recently published data from 2022. Transaction accounts include savings, checking, money market and call accounts, as well as prepaid debit cards.
How many Americans have over $100,000 in savings? ›
How many Americans have $100,000 in savings? About 26% of U.S. households had more than $100,000 in savings in retirement accounts as of 2022, according to USAFacts, a nonprofit organization that analyzes data from the Federal Reserve and other government agencies.
What is a good net worth by age? ›
Average net worth by age
| Age by decade | Average net worth | Median net worth |
|---|
| 20s | $99,272 | $6,980 |
| 30s | $277,788 | $34,691 |
| 40s | $713,796 | $126,881 |
| 50s | $1,310,775 | $292,085 |
4 more rowsPersonal Savings in the U.S.
18 percent said their saving were at least $1000 but under $10,000, while 11 percent each had $10,000 to $49,999 and $50,000 or more saved up.
Do 90% of millionaires make over 100k a year? ›
Ninety-three percent of millionaires said they got their wealth because they worked hard, not because they had big salaries. Only 31% averaged $100,000 a year over the course of their career, and one-third never made six figures in any single working year of their career.
What is living paycheck to paycheck? ›
"Paycheck to paycheck" is an informal expression describing someone's inability to pay for living expenses if they lost their income. People living paycheck to paycheck are sometimes referred to as the working poor. Living paycheck to paycheck can occur at all different income levels.
How many people have $50,000 in credit card debt? ›
Running up $50,000 in credit card debt is not impossible. About two million Americans do it every year. Paying off that bill?
What is the average credit score in the United States? ›
The average FICO credit score in the US is 717, according to the latest FICO data. The average VantageScore is 701 as of January 2024. Credit scores, which are like a grade for your borrowing history, fall in the range of 300 to 850.
How much money does the average American have on their credit card? ›
The average American household now owes $7,951 in credit card debt, according to the most recent data available from the Federal Reserve Bank of New York and the U.S. Census Bureau.
How much debt does the average person have in us? ›
The average American owed $103,358 in consumer debt in the second quarter of 2023, the latest data available, according to credit bureau Experian.
How many Americans are financially stable? ›
Current Financial Situation. At the end of 2022, 73 percent of adults were doing at least okay financially, meaning they reported either "doing okay" financially (39 percent) or "living comfortably" (34 percent). The rest reported either "just getting by" (19 percent) or "finding it difficult to get by" (8 percent).
What percentage of retirees are debt free? ›
Average Retirement Debt: The Numbers
Three in 10 devote more than 40% of their monthly income to debt and a quarter have a mortgage with more than 20 years remaining on it. More than half say they intend to enter retirement debt free, but only one-quarter of retired Boomers actually are debt free.
What percentage of US debt is owed to citizens? ›
The Federal Government Has Borrowed Trillions, But Who Owns All that Debt? At the end of 2022, the nation's gross debt had reached nearly $31.4 trillion. Of that amount, about $24.5 trillion, or 78 percent, was debt held by the public — representing cash borrowed from domestic and foreign investors.
