Why didn't I think of this before?

Debt service includes the payment of interest and the payment of some portion of existing debt.

FRED has household debt service (as a percent of disposable personal income). They have household debt, and household interest paid, and disposable personal income.

I can set up a calculation where I take interest paid, add some percentage of existing debt, and divide the total by disposable income. Then I can tweak the percentage number to get my calculated number close to FRED's debt service number on a graph. The percentage number I get will be a rough estimate of how much debt we repay each year.

This calculation assumes that we pay the same percentage of our income our debt every year. Is that a good assumption? Well, the graph will show us. If the lines run near parallel from start to finish, it is a good assumption. We could then say that, on average, we repay so-and-so percent of our debt every year. But if the two lines veer apart, it's not a good assumption.

My method will be to try different percentage numbers till I find one that brings the lines close together. I know there is a better way, regression or "least squares" or something, but I don't know the one and don't remember the other. So I'll just guess and see how it turns out.

Graph #1: Household Debt Service since 1980 (blue) and my calculation (red)

Okay, if I narrow the graph at FRED, part of the upper-border text goes missing. That's unacceptable. So I left the thing the default width, made it taller, and saved the image, then shrunk it down more than I normally do to fit the blog space. As a result, the text on this graph is smaller that usual and more difficult to read. Thanks a lot, FRED. (To see the graph bigger, of course, you can just click it.)

The blue runs a little above the red at the start and end, and a couple spots between; the two run tight together in a couple places; and blue runs a little below red for the rest. I'm saying they run nearly parallel and pretty close together.

The graph says that on average, we repay about 4.5% of our debt each year.

Couple thoughts:

• I can look at the discrepancy, the difference between red and blue, and try to find how the differences arise. Recession-related? Recovery-related? ExtremeDebtBurden-related?
• I can work backwards and calculate the percentage repayment numbers instead of guessing them. Might be interesting to see that.

Something else: If I'm satisfied that my red-line calculation is good, rough but good, then I should be able to say that the red line is an estimate of household debt service all the way back to the late 1940s. That would be useful.