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According to the Fed's calculations as of the end of last year, U.S. households' financial burdens fell to the lowest level they have been in over 30 years. This comes thanks to rising incomes, belt-tightening, debt refinancing, deleveraging, and debt restructuring.

(click to enlarge)

Note that the lines on the chart are the ratio of total monthly financial obligations (blue) and mortgage and consumer debt payments (red) to disposable income. The typical household now spends only 15.5% of its disposable (i.e., after-tax) income on auto leases, homeowners' insurance, property tax, mortgage payments, consumer debt payments, and rent. This is down from a high of 19% in the third quarter of 2007; that's a reduction of almost 20% in recurring monthly payment obligations relative to disposable income.

This is not only very impressive, but also very encouraging for the future since it means that households' financial health is back on a much stronger footing, despite the fact that total employment is still far below where it was prior to the recession. It never pays to underestimate the ability of the U.S. economy -- and U.S. households -- to cope with adversity and adapt to changing conditions. If only our government could do the same.

Source: Households' Finances Continue To Improve