What are some of the most critical financial statistics that everyone should know? This is a list of 10 most common financial facts that are essential for you to understand.
10 Financial Statistics You Should Know (And Learn From)
Money and finances is an area that should be of great concern to everyone’s life. If you want to be financially literate and succeed, then you must follow and learn more about money trends around you.
For example, what does an average American make? How much debt do they owe? Or how much do they save?
All these are financial statistics that you should understand if you are to rise above the bar. And with so many dynamics associated with finances, you should learn how to interpret financial statistics to make more sense of what is happening around you.
Ever since I started seeking more financial knowledge, my financial life also took a completely new turn.
From being employed to making over $5,000 every month without much hassle, now I can manage my finances more efficiently.
List of Financial Statistics You Should Know (And Potentially Avoid)
Let’s get into several variations of financial statistics.
Personal Finance Statistics
Although its good to compare your finances with those of average Americans to identify where you belong, some of these stats should worry you. You should try to rise beyond most of these financial statistics.
59% of Americans Live on Paycheck to Paycheck
Living from paycheck to paycheck is undoubtedly one of the scariest financial trends I can think of. A research conducted by Charles Schwab indicates that around 59% of people living in the US live on paycheck to the next. This means that they either don’t earn enough, or they don’t have a set savings structure.
59% means that more than half of all Americans spend everything they make, leaving nothing for savings or emergencies. They are living from hand to mouth, which is quite dangerous. If you are in that category, you ought to find a way to get out.
One of the best ways to stop this trend is through budgeting. You should have a plan that guides you on your spending habits and shows you exactly where your money is being spent most. This way, you can adjust your spending for the best.
To make this easy, you should consider using the Personal Capital app. This app is an incredible tool that helps you to manage all your accounts, cash flow, and income all in one platform. It also helps you to know your net worth continually, and it’s completely free.
Apart from budgeting, you should also ensure that you have multiple sources of income. Creating several streams of income ensures that you have enough money to spend and save for any financial uncertainties.
About 67% of People in the US Will Have a Hard Time Paying a $1,000 Emergency Expense
Imagine that only 33% of all Americans can pay for a $1,000 emergency bill without straining. What does this imply?
These statistics show that people don’t plan for emergencies. People don’t set aside cushion money to cater to eventualities when they occur. It means they are spending a large part of their income, if not all, and leaving nothing for savings.
These findings by NORC, are a clear indication of the financial difficulties that the larger part of the American population is facing. But, there is always a way out.
First, you must be able to manage your finances. Without proper financial management, you can never run away from this predicament.
Finding some extra sources of income to supplement your monthly income can also be a great plus to your finances. For example, if you have only one stream of income, you can quickly join the gig economy, which offers flexible jobs that you can do during your free hours.
Some of these opportunities include:
- Survey sites: such as InboxDollars, Swagbucks or SurveyJunkie
- Freelance platforms: such as Upwork, Fiverr or TranscribeMe
- Start Your Blog
- Affiliate Marketing
- Part-time jobs
One thing which is very important to note is that not having any savings does not depend entirely on how much you earn. This is a combination of both your earnings and your pattern of spending.
It, therefore, means that although it is vital to make more money, it’s even more critical to manage your income and expenditure. Budgeting is, therefore, essential in your financial life.
One app that I like to use is Trim. Trim will go through all of your expenses and find opportunities to reduce them. The best way to make money instantly is to reduce your expenses.
See Related: Financial Resources to Use Daily
33% of the Adult Population in America Saved $0 for Their Retirement
This is indeed a worrying statistic. Moreover, even for those who save, 23% of them save minimal amounts of money. When you combine these two percentages, you can see that 56% of the entire adult American population have saved less than $10,000 for their retirement.
If you consider the fact that most average Americans will require a minimum of $1 million for retirement, this is a terrifying trend. On the other hand, millennials will need something from $1.8 to $2.5 million to retire comfortably.
For this reason, people should learn to start saving for their retirement as soon as possible. When you start late, the more money you will need to set aside every month to hit your target.
If you have a 401k and IRA, you can use a tool like Blooom to analyze your fees and ensure you are not overpaying for your investments. It’s completely free to run the analyzer and make improvements.
See Related: How to Maximize Your Walmart Cashback
Around 38% of Households in America Have Credit Card Debt
The use of credit cards has increased in the US over the past few years. And, this is one factor that has made so many people find themselves in debts that they hadn’t planned to get into.
On average, these people owe about $16,048 with an annual percentage rate (APR) of 16.47%. Using these figures, it means that someone who takes ten years to clear their balance would pay an interest of over $16,695 to the card issuer. This can be much more than double or triple the initial amount they spend.
The worst thing with credit card debt is that most people don’t even realize that they are parting away with so much money.
So, before you get yourself into such debt, do your math.
See Related: 12 Reasons Your Debit Card Declined
Financial Literacy Statistics
76% of Millennials Lack Basic Financial Literacy
This is clearly shown by research done by NEFE (National Endowment for Financial Education). The study indicated that only 24% of all the respondents in the survey passed the test of having basic financial literacy. Also, only a mere 8% had high financial literacy.
These financial literacy statistics paint an interesting picture of a large percentage (69%) of people who think that they possess the necessary financial skills, but in essence, they don’t.
Many people consider themselves financially literate, but when tested, they lack even primary knowledge.
But how do you get out of this category and join the 8% one?
Well, it’s all about learning, growing, and adjusting. This means that you should always be ready to learn. Every time you make a mistake, learn from it and find a solution.
For example, make a habit of reading financial articles and watching videos on sites like YouTube.
The more you read, the more knowledgeable you become, and the more you will also be able to handle your financial issues.
By growing your financial knowledge, you are setting off on the right path towards attaining financial freedom.
See Related: Personal Capital Review
21% of the Total Population Leaves Zero Savings from Their Annual Income
A whole 21% of the American population saves nothing out of their entire year’s income. According to this report by CNBC, it means that in every five US residents, one is not sparing even a penny for the entire year.
Looking at it critically, this is a dire trend that Americans should worry about. And, although many people would argue that the cost of living has gone up, I would say that we also need to do more to keep up with the prices.
We cannot afford to live this kind of uncertain life due to the rising cost of living. For example, if saving is that hard, various apps can help you automate your savings to make the process easier.
Also, numerous passive income apps have come up. These apps can help you in creating more passive income streams to grow your net worth.
And, if you want to learn more about savings, you can read my blog on why is it so hard to save money. This will enable you to see how to overcome the barriers that hinder you from saving.
See Related: What Does Independently Wealthy Mean?
More Financial Statistics
Average Annual Income in the U.S. is $47,060
A recent report by the BLS (Bureau of Labor Statistics) indicates that a full-time salary or wage worker earns an average income of $905 per week. This estimation is based on data from the 2019’s first fiscal quarter.
If that person works for 40 hours every week, the amount will translate to around $47,060 annually, which is an increase of 2.7% from the previous year.
Based on a report by the U.S. Census, the “real median” household income in the US was $63,688 at the beginning of 2019. This was an increase of 0.3% from December 2018.
Also, another report by the BLS targeting the part-time workers indicated that these workers had a median income of around $272 per week. The report also shows that there are over 24.8 million workers in the US working as part-timers.
See Related: BILLSHARK Review
Of All Student Loan Borrowers, Only 57% are Making Payments
Education in America has quite taken another level. Currently, there are many Master’s degrees, as there were bachelor’s degrees in the 1960s.
But, although the level of literacy has grown immensely, it’s no secret that the process of attaining that knowledge has also become quite expensive. This makes more and more graduates to struggle or fail altogether in repaying their student’s loans.
For example, over the last 30 years, tuition in public institutions has gone up with around 213%. But, almost half of the total 22 million citizens with student loans are not paying. Most of them are either behind on their payments or have completely stopped paying as a result of economic hardships.
For this reason, students should be made to understand better how their repayment schedule will be like after graduation. This will help them to make wise decisions on the kind of degrees they want to pursue.
Connecticut is the one state whose student loan borrowers have the highest debt. For instance, the average debt for the class of 2018 was $38,776.
On the other hand, Utah is the state with the lowest student debt level. The class of 2018 in this state had an average of $19,742 in debt.
I refinanced my student loans to help me repay them quicker. It saved me thousands of dollars without doing much work at all. You can use a tool like Credible to find the lowest rate possible for your student loans.
See Related: How to Save Your Money with a Purpose
77% of All America’s Home Buyers Finance Their Purchase Through Mortgages
The percentage shows that only 1/3 of all American homeowners buy their homes using other means. This is according to data from the Federal Reserve of New York. Also, of that 77%, 58% are still making payments for their mortgages.
The mortgage debt in the US also varies significantly based on location. For example, people in Washington, D.C, have a median debt of $416,848, which is the highest as compared to the other states.
On the other hand, West Virginia has the lowest average debt that stands at $110,158.
The overall average mortgage debt in the US is $202,284, while the average cost for a home is $234,500.
See Related: Is it Worth it to Start Living Stingy?
The Average American’s 401(k) Balance is $106,000
As of the second quarter of 2019, the overall 401(k) average for Americans was $106,000. This is based on research by Fidelity.
Some experts recommend that you should aim at saving your entire annual salary by age 30, while others like Fidelity suggests that you save at least half of it.
Based on age, the breakdown of the average 401(k) for the Americans is as follows:
- Ages 20 to 29: $11,800
- From age 30 to 39: $42,400
- Ages 40 to 49: $102,700
- 50 to 59 years : $174,100
- Above 60: $195,500
Factors that determine how much you set aside include:
- Duration of time you have been in that job
- If your employer matches it or not
- Your total earnings
See Related: How to Invest Small Amounts of Money
Conclusion on Financial Statistics You Should Know
When it comes to finances, only a small percentage of the population understands the importance of being financially literate. And seeing that only five states require high schools to teach personal finance, the burden ultimately falls on the individual.
These financial statistics indicate that it’s vital for everyone to take responsibility and learn more about how to manage their finances. This way, we can lower some of these negative stats about finances and increase the positive ones.
Also, companies and education institutions should be on the front line to create more financial management awareness.
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