Yearly Spending Spree

By: Matt MillerThe news:

The holiday season, as usual, ushered in a national spending boom. Before the holidays, the National Retail Federation estimated that retail sales would total nearly $475 billion this past holiday season, up 4 percent from the previous year.

Behind the news:

Non-Hispanic white households have more total debt, as well as greater debt-toincome ratios, than households of all other races and ethnicities on average, according to the Federal Reserve Board’s most recent triennial Survey of Consumer Finances, conducted in 2004. But the data show that white households tend to have much greater assets than others, making their debt easier to bear.

The Reserve’s survey showed that the median annual household debt of white people exceeded income by more than $20,000. The figure is in a stark contrast to the approximately $700 that others owed more than their earnings. Yet the median asset value of white families was $224,500, while others had only $59,600. This means that, while they held more than twice as much total debt, white households had a much lower ratio of debt to assets—31 percent compared with 51 percent for others.

Lynnette Khalfani-Cox, an author of several financial planning books and the proprietor of the financial advice Web site, themoneycoach. net, said that the income-to-debt disadvantage fared by white people is significantly outweighed by their assets-to-debt advantage.

“If you have home equity as an asset, for instance, you’re much better able to weather a storm—like if you can’t resist the shopping lures of the holidays and you charge up credit cards,” said Khalfani-Cox. “The safety net is there around whites, especially because they are much more likely to be homeowners than African Americans, for example.”

Tom Mondschean, professor of economics at DePaul University, agreed. “A family with more assets can dip into a savings account or sell something to compensate for an increase in spending,” he said.

Khalfani-Cox said, as a subset of total debt, credit card debt may inflate more than others during the holiday season. The average consumer charged $628 to credit cards during that time in 2006, according to CardTrak.com, a credit card trend research Web site. The average American household owed a total of $9,659 in 2006, with around 22 percent of households reporting more than $10,000 in credit card debt.

Illinois ranked fifth nationally in bank credit card debt at $36 billion—one-twentieth the U.S. total—at the end of 2005, the latest year for which the data were available, according to CardTrak.com.