How do you compare financially to Americans overall?

 Among U.S. families, 66% own their home, 58% own stocks, 54% have a retirement account, 45% have credit card debt and 35% have a car loan, according to the Fed's latest Survey of Consumer Finances.

Of course, no one is really average but the figures help you get an idea of where you stand. 

"Net worth. The typical (or “median”) net worth—meaning the value of all assets minus all debt for those American families halfway down the wealth spectrum—was $192,700 in 2022.  But the average (or “mean”) wealth, which measures America’s total net worth divided by all households, stood at $1,059,470. This is a classic example of skewness, with a small number of outliers—in this case, America’s wealthiest families—skewing the results higher."

Income. Skewness also shows up in pretax family income. As of the latest survey, the median (mid-point) household income was $70,260, while the average was twice as high, at $141,390. Houshold income is different from family income because households include singles whereas families are composed or two or more individuals which means the potential for two (or more) earners. 

Stocks. 58% of U.S. families were invested in the stock market, up from 48.9% nine years earlier. 

Real estate. 66% of families owned their primary residence, up from 63.7% six years earlier, but below the peak of 69% in 2004 (before the 2008 financial crisis).

Retirement accounts. 54.4% of families have a retirement account. Even in the age group where retirement accounts are most widespread—those ages 45 to 54—they’re held by just 62.2% of households. Those ages 65 to 74 had median retirement account balances of $200,000, enough to generate $670 in monthly income, assuming a 4% withdrawal rate.  

Credit cards.  When the data were collected... "credit card balances in inflation-adjusted terms are at their lowest levels since the 1990s. In 2022, 45.2% of families had card debt, down marginally from 2019, with a typical balance of $2,700 and an average balance of $6,120. Credit card debt is the most common form of debt, ahead of home loans, which 42.2% of families have, and car loans at 34.7%. Overall, 77.4% of families have some form of debt." However, the most recent data (mid-2023) show increases in the number of households with credit card debt and the amount of debt. 

Education loans. Roughly a fifth of families have student loans, with a typical balance of $24,500 and an average balance of $46,980.  

Thanks to Humble Dollar https://humbledollar.com/ blogger Jonathan Clements for this summary.  More details are available at: https://humbledollar.com/2023/10/by-the-numbers-2/?utm_source=mailpoet&utm_medium=email&utm_campaign=another-ses-test_7

How is the financial health of Americans changing over time?

If you are facing challenging financial stress due to the coronavirus, you are not alone. Even in 2019, before the virus, most Americans were not financially healthy according to research by the Financial Health Network https://finhealthnetwork.org/research/u-s-financial-health-pulse-2019-trends-report/?utm_source=nyt-paid-post&utm_medium=pulse-button&utm_campaign=nyt-paid-pulse
"In a year-over-year analysis, the second annual U.S. Financial Health Pulse report reveals that the majority of Americans are still not financially healthy, despite an economy that has continued to grow" based on 2019 data before the virus.

"The 2019 Trends Report presents findings from the second annual U.S. Financial Health Pulse consumer survey, including:
1. Only 29% of Americans are financially healthy, despite a booming economy.
2. Financial health disparities based on income, age, gender, and race have persisted since 2018.
3. Financial health changed for millions of Americans from 2018 to 2019, often dramatically.
4. People who had changes in their employment and physical health saw the largest year-over-year shifts in their financial health."
Keep in mind that these data and conclusions are from 2019 before coronavirus.

Taking the Nation's Financial Pulse in Uncertain Times

"Millions of Americans were struggling financially, even before the Covid-19 crisis." 

"The U.S. Financial Health Pulse shows that only 29 percent of Americans were financially healthy in 2019. Just over 70 percent of Americans were not financially healthy and may be unprepared for changes in their income, financial shocks or an economic downturn. These figures were roughly the same as 2018, but likely to change as the coronavirus outbreak takes its toll on the economy."

https://www.nytimes.com/paidpost/financial-health-network/taking-the-nations-financial-pulse.html?cpv_ap_id=50043239&sr_source=lift_morein&tbs_nyt=2020-March-nytnative_morein

"The U.S. Financial Health Pulse led by the Financial Health Network, is a landmark study designed to capture a more holistic picture of the financial health of Americans. The Pulse follows a large group of the same respondents year over year. It also combines survey data on spending, saving, borrowing and planning to devise a FinHealth Score™ that gives a detailed and realistic picture of how Americans are doing financially. Respondents fall into three categories: financially healthy, financially coping and financially vulnerable."

While the Financial Health Network is primarily geared to professionals in pubic policy, finance, and social networks, the knowledge that you are not alone if you are experiencing financial problems is key to taking action rather than blaming yourself. This blog is designed to for self-help and awareness of how to change one's behavior and resources for improving financial well-being.

A ONE-OF-A-KIND CONTINUING STUDY
SHOWS THAT MILLIONS OF PEOPLE
ARE LIVING ON THE EDGE

A ONE-OF-A-KIND CONTINUING STUDY
SHOWS THAT MILLIONS OF PEOPLE
ARE LIVING O 

A ONE-OF-A-KIND CONTINUING STUDY
SHOWS THAT MILLIONS OF PEOPLE
ARE LIVING ON THE EDGE

3 Simple Things to Improve Your Finances

1. Increase mindless saving
2. Decrease mindless spending
3.Save in an online bank account

1. Automate saving so you don't have to think about it. Pay yourself first with regular automated saving from your paycheck. It's so easy to do these days with electronic banking.
"Automate your savings so you never even have to think about saving anything. Take yourself completely out of the equation — you can’t miss (or spend) what was never there. Self-control is a myth anyway, so just don’t bother with it." writes Tim Herrera in The New York Times Smarter Living newsletter. Every Monday, S.L. editor Tim Herrera emails readers with tips and advice for living a better, more fulfilling life. Sign up here to get it in your inbox.

2. "As more of the services we regularly use become subscription-based — especially given the flood of streaming TV services — it’s more than worth your time to prune your subscriptions. One analysis by the online budget tool Mint found that in 2019, we each spent $640 on digital subscriptions." 
Instructions to find and cut your subscriptions on many devices and services can be found here, but also go through your bank account and look for recurring expenses. 

3. Switch to a high-yield savings account

Put compound interest to work for you. Most savings accounts pay a pathetically low yield. Switch to an online bank, many paying 1.6% interest or more and automate your savings from every paycheck into this account. Search online for online banks with high rates. 

Life’s most important money lessons

Humble Dollar author and personal finance guru Jonathan Clements offers these recommendations:

1. A small home is the key to a big portfolio.
2. Debts are negative bonds. paying off debt almost always garners a higher after-tax return than you can earn by investing in high-quality bonds.
3. Watching the market and your portfolio doesn’t improve performance.
4. Thirty years from now, you’ll wish you’d invested more in stocks.
5. Nobody knows squat about short-term investment performance.
6. Put retirement first. Before buying a house.
7. You’ll end up treasuring almost nothing you buy. Focus on experiences rather than possessions—a wise use of money, says happiness research.
8. Work is so much more enjoyable when you work for yourself.
9. Will our future self approve? As we make decisions today, consider how your future self will look back on your choices.
10. Relax, things will work out.

Get the full details: https://humbledollar.com/2020/02/nobody-told-me/

Financial Life Planner

HumbleDollar’s financial life planner’s goal is to guide you through 13 financial steps that’ll help you navigate the journey from your early adult years to retirement.

• Step 1: Prep for Success
• Step 2: Stockpile Cash
• Step 3: Doctor’s Orders
• Step 4: Aim to Retire
• Step 5: Shed Bad Debt
• Step 6: Protect Your Pay
• Step 7: Buy a House
• Step 8: Plan Your Estate
• Step 9: Make Projections
• Step 10: Educate the Kids
• Step 11: Revamp Insurance
• Step 12: Pay Off Debt
• Step 13: Quitting Time

https://humbledollar.com/money-guide/your-financial-plan/

The science behind why saving for retirement is hard and what to do about it

"The majority of Americans—59% according to a 2019 study by Charles Schwab—say they live paycheck to paycheck, making saving money a challenge. But beyond the that, there are lots of reasons why people don’t prioritize planning for their future, even though they know they should. It’s here where research in behavioral science can help" writes David Hoffeld.

"One of the primary reasons why we don’t make choices that set ourselves up for a secure retirement is because of how our brains are wired. Each of us has cognitive biases that lead us astray. Yet, by understanding these biases, you can make sure that you do not fall under their influence."

Bias #1: Temporal discounting 
(aka time preference) is a tendency to give greater value to rewards received sooner compared to much larger rewards if one is willing to wait.We are willing to settle for a small reward today rather than wait for a much larger reward in the future.  If you've heard about the "marshmallow test" of delayed gratification with preschoolers, you know what I mean. See: https://www.thoughtco.com/the-marshmallow-test-4707284
Adults who cash out retirement savings when changing jobs suffer from

Bias #2: Loss aversion 
Investors tend to prefer avoiding losses over achieving equivalent gains.
Suppose you decide to move your investments to “safe harbor” accounts (think money markets and CDs) to avoid potential losses in a down market. The longer you stay in these kinds of accounts, the more you risk losing some of your purchasing power to inflation. How do you know when to reinvest in the market?

Bias #3: Recency bias
Recency bias occurs when an investor tends to weigh recent events more heavily than earlier events. They think the recent past will repeat itself in the near future so investors look at what investments did well in the recent past and move their money into those investments at peak prices. See: The Callan Table for a visual example of how investment categories vary over the decades.

Confirmation bias occurs when we favor information that reinforces the things we already believe. It’s a common phenomenon in how we choose our news sources (think FOX vs. CNN), and it’s also common in investing.


Get the details:
https://www.fastcompany.com/90453952/the-science-behind-why-saving-for-retirement-is-hard

OK... now what can you do to address these threats to your financial security?

The Top 3 Blind Spots That Keep You from Building Wealth 

 "DALBAR’s Quantitative Analysis of Investor Behavior study tracks investor returns and finds consistently that the average investor earns much less than market indices suggest. For example, according to DALBAR, the average investor lost 9.42% in 2018, compared to losses by the S&P 500 of only 4.38%. Why? DALBAR attributed the loss to investor behavior ­­— avoiding market volatility by decreasing exposure, and even losing more money by being out of the market during periods of gains."

"How to avoid recency bias: Look for context in long-term trends, not just recent headlines, to provide perspective. If you have worked with your adviser to create a financial plan, stick to it. Jumping in and out of the market places you at greater risk. As David Booth of Dimensional Fund Advisors puts it, “Missing out on big growth has as much of an impact on a portfolio as losing that amount. How long does it take to make that kind of loss back? And how is someone who got out supposed to know when to get back in?”

"How to avoid loss aversion: Focus on your long-term goals instead of worrying about the day-to-day ups and downs of the market. You’ll sleep better and portfolio will continue to grow over time."

"How to avoid confirmation bias: Always consider multiple viewpoints. If you work with an adviser, ask him or her to help you evaluate investments by including the pros and cons of any potential decision."

Temporal discounting

Adults who cash out retirement savings when changing jobs suffer from TD. Do a simple compound interest analysis of how much those dollars would grow if you left them invested until retirement. Teh results can be surprising.  

https://www.valuewalk.com/2020/01/investing-emotional-bias/

Book worth reading- The Financial Diaries: How American Families Cope in a World of Uncertainty

If you feel frustrated or guilty by not following all the personal financial advice you've heard or read this book might provide some relief.
"Deep within the American Dream lies the belief that hard work and steady saving will ensure a comfortable retirement and a better life for one's children. But in a nation experiencing unprecedented prosperity, even for many families who seem to be doing everything right, this ideal is still out of reach."
"In The Financial Diaries, Jonathan Morduch and Rachel Schneider draw on the groundbreaking U.S. Financial Diaries, which follow the lives of 235 low- and middle-income families as they navigate through a year. Through the Diaries, Morduch and Schneider challenge popular assumptions about how Americans earn, spend, borrow, and save―and they identify the true causes of distress and inequality for many working Americans."
"We meet real people, ranging from a casino dealer to a street vendor to a tax preparer, who open up their lives and illustrate a world of financial uncertainty in which even limited financial success requires imaginative―and often costly―coping strategies. Morduch and Schneider detail what families are doing to help themselves and describe new policies and technologies that will improve stability for those who need it most."

Get money smart. 25 tips to improve your financial well-being from CFPB

This is just a summary of a great website from the Consumer Financial Protection Bureau; it's almost like a complete personal finance course in one place. Click here: https://www.consumerfinance.gov/about-us/blog/get-money-smart-25-tips-improve-your-financial-well-being/?utm_source=newsletter&utm_medium=email&utm_campaign=General&utm_content=October2019

Understand where your money goes 

         1. Take our quiz to see how healthy your finances are. https://www.consumerfinance.gov/consumer-tools/financial-well-being/ 

         2. Learn where your money is coming from. 

         3. Learn where your money is going. 

         4. Write your bill due dates on a calendar. 

Small changes can make a big difference 

         5. Create a working budget that matches your cash flow. 

        6. Request due dates for your bills that help you stay on track. 

        7. Compare your spending month-to-month. 

Save for emergencies

8. Give yourself financial security with an emergency savings fund.

9. Set rules for your emergency savings–but don’t be afraid to use it.

10. Make saving easy by making it automatic.

11. Put extra money into savings at times when you have it.

12. Use your tax refund to help you reach financial goals.

Reduce your debt

13. Before making a plan to pay down your debts, know what you owe.

14. Choose a debt reduction strategy that works best for you. 

15. Learn about federal and private student loans repayment options. 

16. In the market for a car? Negotiating can save you hundreds or thousands of dollars over the life of your loan. 

Create better money habits 

17. Apply only for credit you need.

18. Set an annual reminder to check your credit reports. 

19. Set up alerts to stay on top of your checking account balance.

20. If you can’t make a bill payment, act fast and call your creditors.

21. When shopping for a loan, get quotes from at least three lenders. 

Plan for success 

22. When planning for the future, set SMART financial goals.

23. Set up a 529 savings plan for your children.

24. Make your savings consistent.

25. Prepare for life events and large purchases by planning ahead.

Trump shutdown over for 3 weeks: What to do without paycheck?

FINRA offers tips on what to do when you can't make ends meet due to job loss or being forced to work without pay (what used to be considered illegal).

Job Interrupted—A To-Do List for Tough Times

"Many of us can identify with the plight of the furloughed federal worker. That's because we have experienced economically stressful times at one or more points in our working life—and may again.
At its most disruptive, your job is lost—and so is your income. Less extreme, but anxiety-laden all the same, is when hours are cut, salary reduced, business opportunities curtailed or paychecks withheld. The situation is the same in all cases: You must live with less.
Here is a short to-do list to get you through situations in which employment is interrupted and income curtailed."

1. Take control of your finances.

2. Manage bills and debt wisely.

3. Borrow with care.

4. Find out quickly if you qualify for unemployment insurance (UI) benefits.

5. Protect yourself from financial fraud and job-search scams.

Read full details at: http://www.finra.org/investors/highlights/job-interrupted-to-do-list-tough-times?utm_source=MM&utm_medium=email&utm_campaign=S%5FAI%5F012219%5FFINAL