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Eight Numbers That Show How American Families Struggle with Money
When it comes to managing our money, Americans have plenty of room for improvement. Sure, we’re the richest country in the world… but most of us still struggle financially to some extent.
Either we’re mired with debt, can’t seem to improve our incomes, or have trouble budgeting for the things we really want in life. These issues are so prevalent that struggling with money has practically become the American way of life. But, why?
While it’s hard to pinpoint the root cause of some of our issues, the fact remains that we could do better. The vast majority of us could stand to save more, invest more, and quit relying on credit as if it were some long-lost friend.
But before you can improve on something, it helps to take a look at where you stand right now – today. Here are eight statistics that show how Americans continue to struggle with money in nearly every aspect of our lives:
The average American household with credit card debt carries a whopping $16,048 balance from month-to-month, according to a recent analysis from Value Penguin. While this figure doesn’t take into account households that are debt-free (many of whom have no debt simply because they can’t qualify for credit), the analysis does show that 38.1% of American households do carry credit card debt of some kind. Households with the lowest net worth – either hovering at zero or below that – carried an average balance of $10,308 on their credit cards in early 2016.
While credit cards can be wielded as valuable financial tools, these numbers show they can also be a destructive force under the right circumstances. After all, how do you get ahead when you’re struggling to pay off credit card bills each month? Ask anyone struggling with credit card debt and they’ll tell you the sad truth: Most of the time, you don’t.
- Related: How to Eliminate Credit Card Debt
The median, working-age couple in America only had $5,000 stashed away for retirement in 2013, according to an analysis of Federal Reserve data by economist Monique Morrissey of the Economic Policy Institute. Worse, Morrissey’s figures show that around 43% of couples had no retirement savings at all.
Morrissey blames the shift away from defined pension plans toward individual retirement savings as the culprit of this crisis, along with the long-term effects of various economic recessions. Regardless, the fact remains that too few of us will be adequately prepared for retirement when the time comes.
- Related: Taking the First Steps Toward Saving for Retirement
Younger couples may not have a lot of money stashed away, but at least they have time. Sadly, the same can’t be said for those ill-prepared couples who are already approaching retirement age.
A further analysis from Morrissey and the Economic Policy Institute shows that the average American couple in their late 50’s or early 60’s had just $17,000 saved in a retirement plan such as a 401(k) or IRA.
While this is surely better than nothing, it won’t be enough to cover much in retirement. With just $17,000 in retirement savings, older couples will have to work longer and rely on Social Security for the bulk of their living expenses in old age.
Even some high-income households were living hand-to-mouth in 2015. In a SunTrust survey of households earning $75,000 or more in 2015, nearly a third reported living paycheck-to-paycheck at least part of the time last year. That number soared to 71% among high-earning millennials, and nearly half of those surveyed, 44%, said that lifestyle purchases made it harder to save as much as they should.
You might not expect these problems among high earners. But if you dig a little deeper, you’ll find that, in a lot of ways, we’re our own worst enemies. A third of the survey’s respondents said that a lack of financial discipline was the biggest problem they faced in their finances. And among those who said they’re not saving enough due to lifestyle purchases, a full 68% blamed dining out for their money woes.
That’s right: Plenty of high-income households are literally eating away at their savings each month. If that isn’t enough to make you lose your appetite, we don’t know what will.
- Related: Instant Gratification: Why 76% of Americans Live Paycheck to Paycheck and How to Beat That Cycle
Each quarter, credit bureau Experian releases a report on the state of the automotive finance industry. And each quarter, the news gets worse. As of the first quarter of 2016, the average loan for a new car surged to $30,032. That’s up from $28,711 for the same quarter in 2015.
By and large, we borrow crazy amounts of money to finance cars each year, to the detriment of our other financial goals. With the average new car loan now teetering above $30,000, it’s not surprising that the average new car payment is a whopping $503 per month. And amazingly, we have convinced ourselves to spread out those payments over an average of 68 months!
Imagine what you could do with an extra $503 a month — for more than five and a half years straight. Even if you stuck it under your mattress without earning a penny of interest, you’d still have $34,204.
A 2015 report from the Federal Reserve Board showed just how fragile American household incomes and budgets really are. Nearly half of American households, 47%, said they couldn’t come up with $400 to cover any type of emergency if they had to.
When you think about it, this statistic explains a lot. Without even $400 in an emergency fund, it’s much easier for families to fall behind or get themselves into debt. What do you do when your car needs a $500 repair that you can’t pay for, yet you have to drive to work? You charge it to your credit card, or maybe even take out a payday loan if you don’t have one.
And from there, it’s much harder to dig your way out. The more debt you have, the more interest you’re stuck paying each month, and the harder it becomes to sock away even $400.
- Related: Half of Americans Can’t Handle a Small Emergency – Here’s What to Do If You’re One of Them
We all know that student loan debt has reached epic proportions in the United States. As of this writing, cumulative student loan debt has surged to over $1.3 trillion nationwide, with no end to that growth in sight.
But it gets worse: Close to 7 million student loan borrowers are severely in default on their loans – as in, they haven’t made a single payment for a year or longer.
Since student loans aren’t normally discharged in bankruptcy, and default can have devastating consequences to a person’s credit and financial future, this statistic spells doom for far too many Americans who are already struggling.
And the problem appears to be getting worse — as the Wall Street Journal noted, the nearly 7 million borrowers in default today represents a 6% increase from just a year earlier.
A recent Gallup poll shows that 60% of Americans worry that they won’t be able to cover unexpected medical costs, up from 55% in 2015. While this number can be partly blamed on our expensive and complicated health care system, it’s also a byproduct of our lack of savings — particularly emergency savings.
When almost half of Americans can’t cover a $400 emergency, it’s no wonder the prospect of large medical bills from an unforeseen accident or illness weigh heavily on our minds.
While these statistics paint a grim picture, there are certain areas where we can exert some control.
We can’t always shield ourselves from medical emergencies or an unexpected job loss, for example, but we can try our best to save for them. We can’t predict the future, but we can plan for it, and create a monthly budget that allows us to save for a rainy day. We can’t always get a raise at work, but we can try to earn extra money through a side hustle, a part-time job, or an at-home business.
At the end of the day, it’s up to each of us to reach our financial destiny and find small ways to make improvements in our lives. The most important thing to know is, you have to start somewhere. Whether you’re in debt and struggling to pay your monthly bills, or you haven’t started saving for retirement yet despite a solid income, or you don’t have the savings to ride out even a small rough patch, the best time to get on a path toward a brighter financial future is now.
What do you think about these statistics? Do any of these situation apply to your life?