What’s more, gross personal financial mismanagement occurred across the population and not just in the mortgage market and not just among the unsophisticated.
The study draws a line at the point where monthly payment on household debt equals 40% of income. That’s where default or bankruptcy becomes most likely should the household experience a decline in income, say researchers led by Sherman Hanna, professor of consumer sciences at Ohio State University.
Overall, the percentage of Americans exceeding this 40% threshold jumped to 27% in 2008, from 17% in 1992. College graduates were more likely to be in this group than those without a degree, according to the study. Those describing themselves as optimistic about the future also were among the most likely to have unmanageable debts, the study found.
Join the conversation as a VIP Member