Shocking Statistics About Personal Finance In America… That Will Make You Cringe!

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Let’s face it, America’s bad money habits border on shameful from time to time.  But would you be shocked to find out that there are literally hordes of Americans operating on the  “buy now and worry later” money philosophy? It seems most people are trying to get out of debt, but only end-up burrowing deeper into it.  Indeed. Many are trying to get the good life, but their bad money habits habits are keeping them stuck in financial mediocrity.

In relation to today being a celebration of America’s independence, it’s time for some eye-opening statistics from the Federal Reserve, US Census Bureau and Internal Revenue Service that should make everyone cringe just a little. Also, it should make every American take stock of their finances and if they are not in control of their financial destiny, take the necessary actions today to gain control and become financially free.

The average American savings account balance is $3,950.

Those that have some money saved obviously recognize the need for saving, but they either saved too little or starting saving way too late. Saving for retirement as early as possible provides someone with the safest and best possible retirement scenario — the more time you allow your money to grow, the more interest compounds. In spite of this commonly known fact, almost half of millennials are not saving for retirement, according to a Wells Fargo survey. That same survey also found that 8 in 10 millennials say the Recession taught them they need to save now in order to survive potential economic problems down the road. Obviously knowing and doing are two different things.

What the future holds for these people:  They will find that their saving accounts are not adequate to support their retirement and will rely on credit cards to fund their everyday needs. With their money literally running away from them at a 20% clip, they will never get ahead and just spend their days being as financially *small* as possible.

40% of working Americans are not saving for retirement.

Retirement savings and preparation are areas where many Americans seem to face challenges. So many people fail to save for retirement at all, let alone save any substantial amount that can actually support them through the last chapters of their lives. It’s easy to tell yourself a story that somehow, someway you’ll be taken care of in retirement, but stories are for children, not grown adults who should know better. This “live for the moment” thinking is the #1 cause of financial angst and heartache in retirement age.

What the future holds for these people:  They will be working into their 70s, 80s, or even indefinitely. For more of what the future holds for these people, see the shocking statistic below about the number of Americans postponing retirement and its consequences.

25% of American families have no savings at all.

Due to lack of savings in the past, one third of Americans over the age of 65 rely completely on Social Security as their primary source of income. While having a steady source of income from Social Security may sound like a life saver, it isn’t. The paltry amounts of monies distributed to recipients, are a clear indication that Social Security was never meant to be the sole source of retirement income. No, it was meant to supplement a person’s other, more meaningful, retirement funds.  I have a challenge for those that are counting on Social Security to be a large factor in their retirement: Sit down today and calculate what your Social Security benefits will be in retirement and compare that number to your current spend rate to see how numbingly small these benefits are to retirees.

What the future holds for these people:  They will end up being financially dependent on friends, family, and charity to support them in their later years.

The average amount saved for retirement by Americans is $35,000.

Many workers have built up at least some retirement funds. One major problem, however, is that it’s too small. When something comes up and they need money for some reason or another, many choose to take it out of their 401(k). Gallup found that overall, more than 20% of investors have tapped into their 401(k) accounts — 9% have withdrawn from their 401(k) accounts early, and 16% have taken out a loan from their accounts. It’s easy to look at a 401(k) balance as a ready source of funds for a large number of “needs”. But know this, taking money out of your 401(k) account prior to retirement is essentially stealing from yourself. You get hit with fees and taxes and are doing the complete opposite of sound financial management.

What the future holds for these people:  All those dips into the cookie jar will leave no cookies at a crucial time in their lives. Those who leave the door wide open to their retirement savings during their retirement building years will find an empty house come retirement age.

The average American household debt $117,951.

Large amounts of debt from credit cards and material things demonstrate one thing – that the person doesn’t understand the basic rule of personal finance: spend less than you make. It’s not any more complicated than that, but many refuse to learn even that basic financial math.  A report released by the National Foundation for Credit Counseling and the Network Branded Prepaid Card Association, showed that 42 percent of Americans give themselves a C, D, or F when it comes to their knowledge of personal finance. I commend people who were honest, but I have to wonder if the numbers aren’t actually worse.

What the future holds for these people:  Those who don’t force themselves to understand basic financial math will always be at the mercy of those who do.  Until they learn the basics, they will essentially donate a large percentage of their future earnings to credit card companies and will make them rich instead.

24% of American workers postponed their retirement age this year.

Let’s be frank here, this is an alarming number. And it’s also something else – it’s a canary in the coal mine. The fact that so many are postponing retirement, is a manifestation of the issues mentioned above in the other statistics.  Know this: Retirement always seems like a long ways away until it is just around the corner. While many people thought they would be sipping martinis at retirement age, they are now serving them. I can’t put this any other way – the workplace is not a pretty place for seniors. It’s geared towards those with youthful energy, so your financial plan should have you far away from the workplace come retirement age.

What the future holds for these people:  Those that have to postpone retirement will find themselves hating life literally, as they crawl out of bed to go to a job they hate just to pay the bills. They will be surrounded by younger, more energetic, people who will work circles around them. Therefore, they won’t be the most well paid or well respected people at their jobs. Work will essentially become a prison for them.

Recognize yourself in any of those statistics? If you do, what can you do to reverse the trend?

The first step is to take responsibility. The choices of the past determine exactly where a person is today. Where you will be five years from now financially, depends entirely on the decisions you make today. Only when a person takes responsibility for their actions can they begin to recognize destructive behaviors, stop them, and begin again in a new direction.

On this day of celebration for America’s independence, declare your own independence from the bad financial habits of the mediocrity.

Declare your independence from the groups of people that fall into the categories above, so that you can have a comfortable retirement.

Declare your independence today so that in the future, you can be financially free.

Be free, Nothing else is worth it.

Financial Freedom Monty Campbell

Want even more information about achieving financial independence? Check-out these other articles from the blog archives:

47 Timelesss Wealth Building Principles

20 Habits You Can Copy To Accelerate Your Success

Can How You Tie Your Shoes Predict Success?

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  • vamem

    If you can’t pay off the balance each month on the credit card then you should probably not use or have it. Paying interest just makes the banks richer.

    • trr

      Not all credit card debt is a bad thing. You could use a credit card to finance your start up business when you cannot get traditional funding through a bank. It’s when you use a credit card to buy stuff you do not need that it can become a problem. There are good uses for credit card debt sometimes.

      • http://www.montycampbell.com/ Monty Campbell

        I personally don’t think it’s a good idea to bootstrap a business with credit card debt. Most credit cards charge 20% interest. That means your business must first earn a 20% ROI just to break even. That’s a high hurdle. I’m all for starting new businesses, but if a person can’t afford traditional financing my advice would be to first get their finances in better order and then start the business.

    • http://www.montycampbell.com/ Monty Campbell

      I agree vamem. Not being able to pay the balance off each month is a sign that your spending is ahead of your earnings.

  • Rachel

    The one statistic economists never mention is that if a consumer has 10% of their monthly income goes to credit card bills, that it would actually need to be increased to 25% of monthly income to actually pay off the debt over several years time.

    • http://www.montycampbell.com/ Monty Campbell

      That’s right Rachel. When money compounds, it is “walking” to you at the interest rate paid. Money compounds with credit card too, but just in the opposite direction. With the high interest rates on credit cards, money essentially is “running away” from the credit card holder.

  • robbybonfire23

    I have developed the ingrained habit of saving money by doing the following…
    Every time I write a check, I record the exact amount next to the date of the check, BUT, when I calculate my new balance, I deduct from my balance 20 per cent over the amount of the check. That’s right. Say I have a balance in my checkbook of $1000. Now I buy an item that costs $100. 1.2 x 100 = 120. So that I now deduct $120 from $1000, giving me a new balance of $880 dollars, not $900,

    One more thing you have to do to make this work. You have to start each month (or week – whenever you get paid) with just the amount of your weekly or monthly income. This guarantees that you will not be simply spending more money, from month to month, money that was earmarked as savings.

    Do this for six months, and watch your account balance grow. If 20 per cent is excessive for you, make it 10 per cent but by all means give it a try. After all, every time you spend money by check, you pay yourself, too. Good luck if you decide to try it. “Save as you go,” and you will get to where you want to go, financially.

    • http://www.montycampbell.com/ Monty Campbell

      That’s an excellent idea! You’re essentially giving yourself a 20% raise each time you write a check and this is a clever way to save money. Thank for sharing Robby!

      • robbybonfire23

        My pleasure, Monty.

  • Dale Wade

    Interesting…I think there will always be people who purchase over their heads but I think there are many who learned (or are still learning) a painful lesson from the economic downturn. They are getting used to living with less as they pay down their credit debt.

    • http://www.montycampbell.com/ Monty Campbell

      Let’s hope that’s the case Dale. The great recession should have been a “great wake-up call” for those over extended with debt.