On Tuesday, May 5th, the Federal Reserve reported that consumer debt had hit an all-time high, rising to $14.3 trillion and surpassing the previous record set in 2008. While government stimulus and enhanced unemployment payments have helped many bridge the income gap, these temporary, unsustainable measures will give way to even higher levels of debt and more delinquency as the economic fallout of the coronavirus pandemic continues. According to creditcard.com, 28 million Americas have added to their credit card debt as a direct result of the COVID-19 outbreak. More than 30% of millennials are going deeper into debt due to the pandemic.
In real terms, this means that millions of Americans and hundreds of thousands of Coloradans will get trapped in the cycle of consumer debt that prevents real financial progress, causes financial anxiety, decreases productivity, and damages physical, mental, and emotional well-being. On top of a reduced income, Coloradans will have the extra bill of high-cost debt on their balance sheets, and, even as they return to work, will find themselves struggling to make ends meet as they carry larger debt loads. This increases financial worry, which 59% of American workers already identify as their dominant source of stress and from which 58% of American workers experience physical symptoms. Financially stressed workers are six times as likely to experience anxiety and seven times as likely to be depressed.
This cycle is perpetuated by the financial industry that wants consumers to be in one of two categories: perpetually trapped in high-cost consumer debt (which creates big profits for lenders) or in an automatic cycle of prosperity (monthly contributions to investments and insurance, which also creates big profits for financial companies).
Once trapped in the high-cost debt cycle, even responsible citizens have a hard time escaping. The addition of another bill on already stressed budgets due to the justifiably high cost of living in Colorado makes it difficult to get stable, positive cash flow. As workers chip away at their debt, any shock financial need (new tires, leaky roof, medical emergency, etc.) will force them to go right back to credit cards and restart the debt and anxiety cycle.
We can give them a way out. By partnering with employers, we can provide low-cost debt solutions—often less than a third the cost of credit cards—along with savings incentives, impact funds, and the coaching and counseling necessary to maximize every dollar of income Coloradans receive to help them make real financial progress and move into the prosperity cycle. This means fewer Coloradans reliant on government benefits, healthier people, and more productivity (we can share studies that prove all this and more). This will attract more employers and employees to our great state and will build a prosperity cycle for Colorado and Coloradans.