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
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.
How many Americans are 100% debt free? ›
What percentage of America is debt-free? According to that same Experian study, less than 25% of American households are debt-free. This figure may be small for a variety of reasons, particularly because of the high number of home mortgages and auto loans many Americans have.
How much debt is the average American in? ›
The average debt an American owes is $104,215 across mortgage loans, home equity lines of credit, auto loans, credit card debt, student loan debt, and other debts like personal loans. Data from Experian breaks down the average debt a consumer holds based on type, age, credit score, and state.
Which gender has more debt? ›
Women are stereotypically seen as irresponsible spenders, but the data doesn't back this up. According to a 2019 Experian study, men carry more debt than women across nearly all categories, including credit card debt — the study found that men have $125 more in credit card debt than women on average.
How much debt does the average 35 year old have? ›
Average credit card debt by age and generation
| Generation | Ages | Credit Karma members' average credit card debt |
|---|
| Gen Z | Members 18–26 | $2,781 |
| Millennial | 27–42 | $5,898 |
| Gen X | 43–58 | $8,266 |
| Baby boomer | | |
Apr 29, 2024
What Is Financial Freedom? Financial freedom means you get to make life decisions without being overly stressed about the financial fallout of those decisions. That's because you're financially prepared for whatever life throws your way—you have no debt, you have money in the bank, and you're investing for the future.
Who owns over 70% of the US debt? ›
Of the $33T of debt, roughly 78% is owned by the public (70% US vs 30% International). The major US public owners include the FED ($6T, but they are no longer buyers), mutual funds, banks, states, pension funds and insurance companies.
What percent of Americans live with debt? ›
Even though household net worth is on the rise in America (at $141 trillion in the summer of 2021)—so is debt. The total personal debt in the U.S. is at an all-time high of $14.96 trillion. The average American debt (per U.S. adult) is $58,604 and 77% of American households have at least some type of debt.
What is the average debt of a 40 year old? ›
Here's the average debt balances by age group: Gen Z (ages 18 to 23): $9,593. Millennials (ages 24 to 39): $78,396. Gen X (ages 40 to 55): $135,841.
How much credit card debt is normal? ›
Average Credit Card Balance by Generation
| Generation | Average Credit Card Debt |
|---|
| Generation Z | $3,262 |
| Millennials | $6,521 |
| Generation X | $9,123 |
| Baby boomers | $6,642 |
1 more rowMar 12, 2024
White people, on average, are more likely to have mortgage debt than Black people, but Black people are more likely to have credit card debt (Dettling et al., 2017).
Who has the most debt on earth? ›
United States. The United States boasts both the world's biggest national debt in terms of dollar amount and its largest economy, which resolves to a debt-to GDP ratio of approximately 128.13%.
Who is the person with the most debt ever? ›
Jerome Kerviel, The Most Indebted Person In The World, Owes $6.3 Billion To Former Employer, Societe Generale. In a hyper-competitive world where everyone strives to be the biggest, boldest and most famous, no one covets Jerome Kerviel record-breaking achievement. He is the most indebted person in the world.
What percent of Americans live paycheck to paycheck? ›
A majority, 65%, say they live paycheck to paycheck, according to CNBC and SurveyMonkey's recent Your Money International Financial Security Survey, which polled 498 U.S. adults. That's a slight increase from last year's results, which found that 58% of Americans considered themselves to be living paycheck to paycheck.
What is a good age to be debt free? ›
"Shark Tank" investor Kevin O'Leary has said the ideal age to be debt-free is 45, especially if you want to retire by age 60. Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued.
At what age do most people pay off their house? ›
But with nearly two-thirds of retirement-age Americans having paid off their mortgages, it means that the average age they have gotten rid of that debt is likely in their early 60s. Stats from 538.com, for example, suggest the age is around 63.
What percentage of Americans are mortgage free? ›
A record share of U.S. homes are mortgage-free
Line chart showing how the share of mortgage-free homes increased from 34.3% in 2012 to 39.3% in 2022, an increase of five percentage points.
How many Americans are financially secure? ›
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).
How many people are debt free when they retire? ›
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 is the average debt of a 67 year old? ›
The Average Debt for People Aged 65-74
Householders in this age group who have debt carry an average debt of $105,250. Among those in this age group who have a primary residence debt, average mortgage debt is $152,890.
