6 Disturbing Personal Finance Trends Among Americans
The American Institute of CPA’s (AICPA) recently published a list of personal finance trends that we should all be concerned about. These trends highlight the fact that almost 63% of Americans today are unable to pass a basic financial literacy test.
Recent Personal Finance Trends Among Americans
Here are the troubling trends, as well as some tips on how to avoid them:
Credit card debt is on the rise. As of the end of December 2018, consumer credit card debt is $870 billion, the highest amount ever. Credit cards can be invaluable to consumers, helping to improve credit scores by using them responsibly. However, they also make it very easy to purchase big-ticket items that were previously out of reach.
Bradford Financial Tip: The rule of thumb is that if you can’t pay your credit card balance at the end of each month, you’re potentially in trouble, with high-interest rates and over-limit fees. Even if you can’t pay your bill off in full each month, you should always pay more than the minimum amount due.
Lower confidence in financial security for retirement. An AICPA survey indicates that only 46 percent of Americans are confident that they will attain their financial goals prior to retiring.
Bradford Financial Tip: In order to ensure that your financial future is secure, start saving now. If your employer offers a 401(k), sign up today. If your employer has a match, you’re losing money if you don’t. If you’re self-employed, open an IRA. But do it today. Retirement sneaks up very, very fast.
Not following a budget. Only 39% of Americans currently follow a budget. Even more alarming, one in four Americans admit to not paying their bills on time, while one in 10 has debts in collection.
Bradford Financial Tip: Creating even a basic budget allows you to see how much money you have coming in each month, how much you need to spend on things like a mortgage/rent, groceries, and other bills. If done right, it will also show you where you’re overspending. Take a few minutes to see exactly where your money is going.
Late car payments. Car loan delinquencies are the highest they’ve ever been. In fact, more than 7 million Americans are at least three months behind on their car payments.
Bradford Financial Tip: Before you buy a car, be sure to set a minimum of what you’re willing to pay for a vehicle, and be sure you know the final price of the vehicle, not just your monthly payment amount. And for those that are lucky enough to have access to quality mass-transportation, be open to the idea that you may not need a car at all; certainly not a new one.
Student loan confusion. According to the AICPA, 81% of graduates with student loans are making financial or personal sacrifices to keep up with their monthly payments. All student loans are not created equal. With student loan debt topping $1.57 trillion, be sure you understand all the repayment parameters prior to signing a loan agreement.
Bradford Financial Tip: Be sure to meet with a financial advisor at your school in order to discuss potential scholarships, possible tuition reduction, and the various loan and repayment options available. For many college students, taking student loans is their first foray into adulthood, and it’s easy for unscrupulous lenders to take advantage of their lack of knowledge.
Americans lack emergency funds. These emergency savings in a bank account should be comprised of at least six months of living expenses to cover unexpected bills or emergencies. Yet, according to the U.S. Federal Reserve, 40% of U.S. adults don't have the savings on hand to pay for a small $400 emergency.
Bradford Financial Tip: Make your emergency savings fund a priority and make cutbacks (dining out, coffee shop drive-thrus and unnecessary purchases) to build up this reserve.
Contact Bradford Financial Center's financial advisors to discover more ways to avoid the financial pitfalls of other Americans.
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