Debt Statistics By State

If you want to avoid debt, don’t be like Mike. He lives in Jackson, Miss., dropped out of high school and hates the mere thought of marriage.

You also don’t want to be like Mike because he doesn’t exist. He is a composite figure that represents the decisions that lead to financial strife. Lifestyle choices have a huge impact, but so does your choice of where to live your life.

Statistics show that it pays to avoid the South and big cities. The best options are places like Cedar Rapids, Iowa, or Rockville, Md., which wouldn’t seem to have much in common.

That’s because when you’re looking for the best place to live a debt-free life, statistics can’t tell the whole story. They are a good place to start, however.

Two leading indicators of financial strife are bankruptcies and credit card debt. The Southeast dominates bankruptcies even more than it rules college football.

Bankruptcy Statistics By State

Tennessee led the nation in 2015 with 610 personal bankruptcies filed for every 100,000 people. Georgia was No. 2 and Alabama was No. 3. Three more SEC states (Arkansas, Mississippi and Kentucky) were in the top 10, and Florida was No. 16.

The states with lowest bankruptcy rates were Alaska, with 56 per 100,000 residents, followed by North Dakota, Vermont, Hawaii and Texas.

Credit Card Debt Statistics By State

As for credit card debt, the average U.S. household carries $5,700 from month to month, but that includes households that carry zero debt. The average for households that carry debt is $16,048.

If you want to avoid such numbers, statistics indicate you should live in the Great Plains. Iowa’s $4,734 per household is the lowest figure in the nation. It’s followed by Nebraska, South Dakota and North Dakota.

The highest concentration of credit-card debt is along the Eastern seaboard, with Virginia, Maryland, Connecticut, New York, Delaware and New Jersey all in the top 10.

Leading the way, however, is  Alaska, where the average household carries $7,706 in debt. If you’ve been paying attention, you just noticed something odd.

The state with the lowest bankruptcy rate is the state with the highest credit-card debt ranking. Alaska also has the highest unemployment rate of any state.

That shows how statistics can be both illuminating and misleading. To understand why debt varies from region to region, you actually need to look at more statistics.

A key one is credit-card default rates. It’s not advisable to carry a lot of debt, but the real red flag is when you can’t pay even the minimum monthly charge.

Though residents of Southern states carry less credit-card debt, they rank high in accounts that are 30 days past due. The national average is 1.47% of the population.

Mississippi leads the nation with 2.35%, followed by Louisiana and Arkansas.

At the low end are Hawaii (1.12%) and Alaska (1.17%). That despite Hawaii and Alaska being among the most expensive places to live.

Standard Of Living Costs By State

While California has the highest cost of living, the Eastern seaboard also ranks high in cost of living, with Massachusetts, New York, Connecticut and Maryland all in the top 10. Conversely, it’s generally cheaper to live in the South, with Georgia, Kentucky, Tennessee, Alabama and Arkansas in lowest 10 states.

A state-wide ranking can be misleading, since the cost of living can fluctuate wildly within state borders. For instance, a consumer making $80,000 a year in Fresno would need to make $130,495 to maintain a similar lifestyle in San Francisco.

The more expensive states also have higher median incomes. The median household income in the U.S. is $53,657. Maryland ranks highest ($73,971), followed by New Jersey, Alaska, Connecticut and Hawaii.

At low end are Mississippi ($39,680), with five more Southern states in the lowest 10 of median income. So what can we conclude?

In general, people living expensive states like Alaska and those along the Eastern seaboard carry more debt because they can afford to. People in less-expensive states carry less debt because they default and file for bankruptcy.

Simply put, they run out of money. So how could they make more of it?

There are a million answers, but two timeless choices stand out. Study after study has shown married people are better off financially than those who are unmarried.

The difference increases as they age.  The National Bureau of Economic Research found that the median 65-to-69-year-old married couple had almost 10 times as much savings at a single person that age.

Education, Income and Average Debt

The other leading financial indicator is education. The median weekly income of a person with a bachelor’s degree is $1,137. The median income of a worker with a high-school diploma is $687, and it’s $493 for those without a diploma.

Not surprisingly, the states with high percentages of adults with bachelor’s degrees are usually relatively wealthy states. Massachusetts has the highest education rates, with 38.3% having a bachelor’s degree or higher, and 90.5% having a high-school diploma.

Of the 15 states with highest education rates, only Kansas had a median household income below the national average. Conversely, 14 of the 15 states with the lowest education rates had household incomes below the national average.

If all these statistics have your head spinning, let’s return to Mike. The numbers say he’d be better off if he lived in Norwalk, Conn.

Most people can’t just pick up and move, of course. But in all 50 states, they can further their education and acquire marketable job skills.

They can also get married, though doing it for money alone is rarely a wise move. It’s always smart to have a budget, live within your means and seek financial guidance.

In the battle to avoid debt, geography plays a role. But it’s not so much where you live that matters, it’s how you live.

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Sources:

  1. (Frolich, T.)(2015, Sept. 23). America’s Most and Least Educated States: A Survey of All 50. Retrieved from http://247wallst.com/special-report/2015/09/23/the-most-and-least-educated-states
  2. (Frolich, T. and Kent, A.)(2015, Sept. 15). America’s Richest (And Poorest) States. Retrived from http://247wallst.com/special-report/2015/09/17/richest-and-poorest-states/2/
  3. (NA)(ND). Highest Personal Bankruptcy Rates In the US By  State. Retrieved from http://www.worldatlas.com/articles/highest-personal-bankruptcy-rates-in-the-us-by-state.html
  4. (NA)(ND). Credit Card Delinquency Rates. Retrieved from http://transunioninsights.com/IIR/#credit-deliquency
  5. (NA)(ND). Average Credit Card Debt in America: 2016 Facts & Figures. Retrieved from http://www.valuepenguin.com/average-credit-card-debt