It wouldn't be too much of a stretch to say that Americans are addicted to debt. While total U.S. consumer debt fell in the wake of the Great Recession, it has been on the rise again over the last few years. Collectively, American households owed more than $12.35 trillion in consumer debt as of the third quarter of 2016. That's a shockingly high number --  close to passing the $12.37 trillion in total debt that was owed in December 2007, when the number was near its peak. 

Debt Ball

Image Source: Getty Images.

Why has household debt been on the rise? While there are a number of factors at play, one of the biggest has been that income gains haven't been keeping pace with increases to the cost of living. Since 2003, household incomes have only risen by 28%, which lags behind the 30% increase in the cost of living over the same time period. That difference may sound small, but it can really add up over time.

What's driving the expense growth? You can blame a handful of categories for most of the gains. Medical care was the biggest contributor, with costs rising 57% since 2003. Food and housing costs have also played a big role, with costs of each up 36% and 32%, respectively, over the same time frame.

Bridging the gap

To help cover the difference, many Americans are taking on debt. As a result, the total amount owed by people continues to grow.

Here's a table that shows the total amount of debt outstanding as of the third quarter of 2016, and how much is owed by the average American household that carries that type of debt.

Category Total U.S.
Consumer Debt
Average Debt of This Type Owed by a U.S. Household Carrying It
Credit Cards $747 billion $16,061
Auto Loans $1.14 trillion $28,535
Student Loans $1.28 trillion $49,042
Mortgage $8.35 trillion $172,806

Data Source: Nerd Wallet.

To me, the standout number from this table is credit card debt. While 61% of American households do not carry a monthly balance, those that do have taken on a scary amount of it -- and it's expensive to carry. In fact, the average household is expected to pay $1,292 in credit card interest per year. That's a big number that will take a bite out of the average household's income. 

What you can do

While these numbers are a bit shocking, there are a plenty of things that the average American family could do to get their debt levels under control.

First, when you are in a hole, the best thing you can do is stop digging. To do that, you need to find a way to get your income level above your expenses as quickly as possible. Cut out frivolously spending, take on a part-time job, or ask your employer for a raise. Even a few quick searches on the internet will pull up plenty of interesting ways to earn extra money.

Second, if you've got credit card debt, do what you can to reduce your interest rate. Sometimes just calling your card companies and asking for a lower rate can work. If they are unwilling to cooperate, shop around for a card that offers you a better rate. You might even be able to find a card that offers a 0% introductory APR on balance transfers.

Third, take all the excess money that you can put together each month at attack your debt with vigor. Even small extra payments here and there can go a long way toward bringing down your balance.

Finally, realize that you are not alone. The widening gap between income and expenses growth has made it increasingly difficult for millions of Americans to keep their heads above water. 

No matter what strategy you use to shed your debt, the key is to take action as quickly as possible. The sooner you can get your debt levels under control, the better off you will be in the long run. 

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