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Why the middle-class is sending mixed messages on debt

Julie Sherrier

Like many personal finance writers and editors, I enjoy reading the latest studies on consumer spending to see if my behavior correlates with recent research.

According to a monthly survey compiled by Sentient Decision Science Inc., called the First Command Financial Behaviors Index, I’m right there with middle-class Americans who are simultaneously paying down old debt while taking on new loans. Why the middle-class is sending mixed messages on debt

The survey (which is not available online yet) says that 68 percent of middle-income consumers are “at least ‘somewhat aggressively’ paying down their debt,” while 43 percent of respondents say they have taken on “at least one new loan in the past 11 months.” Here’s the breakdown for the new types of loans people are taking out:

Credit cards (18 percent)
Auto loans (14 percent)
Retail cards (11 percent)
Mortgages (8 percent)
Bank cards (7 percent)
Student loans (6 percent)
Home equity loans (4 percent)
Consumer finance loans (3 percent)

It makes sense to me, even though the headline for the news release says “Middle Class Sending Mixed Signals on Debt.” Allow me to explain, from my personal perspective, why the survey results make sense.

At the beginning of the Great Recession, when property values began to tank, I was laid off from a job in the real estate sector. This was a first for me (except when I was let go from a telemarketing job in college selling tickets to a police charity ball). For nine months, I struggled to pay the bills (including a $600 Cobra health care premium!!) on unemployment checks and then on a part-time salary, until finding full-time employment here at

During that time, I accumulated hefty credit card debt and discovered discount shopping and the true value of coupons. Oh, and I’ll never forget losing 30 percent of what I had saved for retirement, which has since recovered somewhat.

But enough grousing. My point here is that times were tough. I spent the next couple of years paying that debt until it was gone. Some people have just been on a different time line than I. I got hit early in the recession. Some got hit later and are still recovering or haven’t recovered yet.

Now why take on new debt after that experience? Well, let’s begin with my car. I had a huge soccer mom gas-guzzling crossover that was nearly 10 years old. Every month or so, I found myself dropping anywhere from $200 to $600 on repairs. Then, when gas prices spiked in 2008, I was spending something in the range of $300 or more a month on commuting fuel. Although the car was paid off, I resisted buying a new car … until December 2010.

I thought long and hard about the purchase, did the math, and then did tons of research over several months to find exactly what I wanted to buy. I test drove cars from virtually every local dealership, except perhaps Mercedes. And when I found what I wanted (a Toyota Prius), I traded in my old clunker, and now have a very manageable short-term car loan.

Cars break and wear down. I am sure I am not the only person who put off a new car purchase several years beyond when you would normally replace a vehicle because the economy was so shaky.

The next thing I did was accept an invite for a new rewards credit card with massive bonus miles and no foreign transaction fees. I hadn’t applied for new plastic in almost 10 years. I had to charge something around $700 in the first four months to get my bonus rewards. Now, I’ve paid most of that off, except for what remains from an unexpected vet bill. My other credit cards remain paid off, except for Home Depot, which seems to always have at least a $100 balance.

So, yes, I am one of those “mixed message” consumers.  It’s just been a matter of waiting until I felt my financial circumstances had recovered enough before I took on any new debt, and I am sure that I am not alone.

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