Learn about these five scary financial truths so you can avoid the same traps.
61% of Americans can’t afford to cover a $1000 emergency
Emergencies can happen to anyone, so it’s necessary to be prepared. Most Americans resort to draining their savings, using a credit card, taking out debt, or borrowing money from friends and family. Each of these has a potentially strong negative impact on your future financial well-being.
The best way to ameliorate this problem is to begin saving. It may seem difficult at first, but making your morning coffee at home or cutting out that extra takeout meal can make a big difference at the end of the month.
Aim to save at least a few dollars per day and this can slowly add up to your first $1000. The most effective strategy is to aim for three to six months of salary in your savings. This is usually enough to help find a new apartment or job in case of urgent changes.
Only 30% of U.S. households have a long-term financial plan
Most households under $75,000 don’t have any type of formal financial plan. Spending without proper reflection makes it easier to get behind on bills and savings.
Begin an economic plan this month by writing down what you currently spend. Next, write down your financial goals and get rid of extraneous expenses. By incorporating a financial strategy, you’ll be more likely to meet your goals and visualize what needs extra work.
33% of American adults have zero retirement savings
A significant amount of Americans have no retirement savings and 23% said they had $10,000 or under. This is more likely if you are just beginning your career. However, retirement planning is rarely taught and the confusion about how to start makes it more likely for many to opt out completely.
If you are new to the workforce, it is important to remember to consistently save for retirement! Always take advantage of retirement savings matching by your employer if they offer it.
If possible, it’s best to aim for 15% of your income in retirement savings, but even saving 5% could make a huge difference. If you start saving at an older age, you may need to save a greater percentage to comfortably retire.
$276 is the average monthly impulse spend amount
Imagine what an extra $276 per month could do to advance your financial goals. That’s an extra $3,312 per year, which is already the beginning of a solid savings!
Start keeping track of where you spend impulsively. By becoming aware, you can stay ahead of the problem and transform the extra funds into a sizable nest egg.
3 million people over 60 still have student loan debt
Most American college students have student debt. Not only can this greatly affect your credit score, but it can cause you to lose even more money in the long-term due to interest rates.
To avoid this pitfall, prioritize paying off student loans as quickly as possible. Take advantage of scholarships and grants available to you while you are in school. If your loan has gone into default, ask your creditor how you can get back into good standing.
Luckily, President Biden has offered some relief to students. The U.S. Department Education will now provide up to $20,000 in debt relief to Pell Grant recipients with loans, and up to $10,000 for those without grants if they make under $125,000 individually or $250,000 per household. Make sure to take advantage of this offer to help make your debt repayment quicker and easier.