A comprehensive examination of debt across the United States reveals interesting disparities in the type and magnitude of debt held by residents of various states. Breaking down these debts into four major categories - auto loan, credit card, mortgage, and student loan - provides a nuanced understanding of financial behaviors and pressures faced by individuals in different states.
To get a picture of household debt in the United States, the fintech PR firm CCI analyzed household debt relative to the average salary of each state. By dividing the average debt by the average salary, we calculated a Debt-to-Salary (DTS) ratio. This number gives us a proportional view of household debt by geography.
By this measure, Utah households are the most indebted in the nation. The average Beehive State household owes 138% of the state's average annual salary. They are followed closely by Arkansas, Hawaii, Alabama, and Colorado. The least indebted state is Arizona (owing just 67% of the average annual salary), followed by Alaska, West Virginia, New York, and Oklahoma.
If measured in terms of absolute debt, that is debt with no reference to salary, the most indebted state is Colorado (averaging $89,170 per household). Colorado is followed by California, Hawaii, Washington, Maryland, and Utah. Similarly, the lest indebted states in absolute terms are West Virginia ($34,210), Mississippi, Arizona, Oklahoma, and Kentucky.
Utah's high DTS ratio may find a partial explanation in the state's demographics. Utah is the youngest state in the union, with a median age of just 31.1 years old. This means that residents of the state are more likely to be early in their financial journey, having had less time to pay down mortgages, auto loans, and student debt. Young parents, who are abundant in the state, may also be in a phase of life where paying down debts takes a backseat to the challenges of raising a family.
It's worth noting that a low debt to salary (DTS) ratio is not necessarily indicative of a population poised for wealth-building. For example, with sky-high salaries and low debt, New York has the fourth lowest debt to salary ratio on our list. However, New York also has the lowest rate of home ownership of any state. Many New Yorkers, accordingly, missed out on the opportunity afforded by record low mortgage rates.
While we're on the topic of the limitations of these numbers, it's worth noting that this data is limited in that it only examines average salary, not average household income. The numbers do not account for the number of earners in a household or sources of income other than salary. Further examination of household income may yield surprising results that challenge these findings. Still, we find the DTS ratio adequate - when supplemented with the underlying data - to provide an interesting picture of the landscape of debt in America.
Because our firm has a political consulting division, we naturally wanted to see whether there were any interesting partisan leanings in our data. How would conservative states fare against more liberal ones? We compared our findings to Pew's party affiliation data in order to see whether state residents' self-identified party affiliation had anything to do with their spending habits. Here are some interesting takeaways:
1: Utah 1.38
2: Arkansas 1.35
3: Hawaii 1.35
4: Alabama 1.34
5: Colorado 1.31
6: Idaho 1.25
7: Nevada 1.19
9: California 1.16
10: Maryland 1.15
1: Texas $7,610
2: Louisiana $6,710
3: Florida $6,370
4: Georgia $6,360
5: New Mexico $6,310
6: Arkansas $6,040
7: Utah $6,040
8: Nevada $6,030
9: Oklahoma $6,000
10: Mississippi $5,990
1: Alabama $4,430
2: Hawaii $4,260
3: New Jersey $4,220
4: Maryland $4,190
5: Connecticut $4,040
6: New York $3,970
7: Virginia $3,960
8: Florida $3,940
9: Colorado $3,940
10: California $3,870
1: Colorado $69,750
2: California $67,980
3: Washington $65,490
4: Hawaii $64,110
5: Utah $61,120
6: Maryland $59,400
7: Massachusetts $56,370
8: Virginia $55,310
9: Oregon $50,320
10: Alabama $50,310
1: Georgia $7,690
2: Maryland $7,050
3: Pennsylvania $6,540
4: New Jersey $6,440
5: Delaware $6,440
6: Connecticut $6,410
7: Massachusetts $6,360
8: Ohio $6,320
9: Minnesota $6,310
10: Colorado $6,280
1: Colorado $89,170
2: California $84,730
3: Hawaii $82,650
4: Washington $82,300
5: Maryland $80,130
6: Utah $79,240
7: Massachusetts $74,260
8: Virginia $74,110
9: Alabama $67,670
10: Oregon $66,950