5 Debt Statistics You Should Avoid
Whelp folks, 2021 numbers are in and not to anyone’s surprise, things didn’t go great for us financially. The good news is that you have the power to change your life! The tricky part is that only you can do the work to change your life.
But don’t fret, I am all about giving you the tools and empowering you to change the financial path you’re on. Below are a few 2021 financial statistics, provided by SpendMeNot.com along with some free advice to help you ditch debt and live rich.
The average credit card debt in America is $6,270.
SpendMeNot claims that “credit card debt is one of the biggest financial problems that households face in the modern world. According to estimates, 45.4% of families carry some sort of credit card debt.”
When we carry over a credit card balance, not only are we paying high interest, but we are proving to ourselves that we can’t afford the lifestyle that we are living. This doesn’t necessarily have to mean that you are living extravagantly, but that you are spending more than you make.
When creating a debt payment plan, paying off credit cards is often top priority as the interest rates are unaffordable. Getting personal loans or transferring the balance to another card is always an option to reduce this debt, but should be consulted first with a professional. Whichever debt payoff strategy you choose, eliminating this high-interest debt should be top of mind.
Just 39% of Americans have enough cash to cover a $1,000 emergency.
When we think about the emergencies that happen in our life, it’s often a car needing repairs, a water heater going out or an unforeseen medical expense. It’s important to have money set aside for these obligations as they often find their way to credit cards, resulting in paying high amounts in interest.
A simple plan to increase your savings will ensure you don’t have to put unforeseen expenses on a credit card. Even if that means putting a pause on other financial obligations, it will be worth it in the end. If you don’t have additional income to build up your savings, you may want to look at temporarily cutting unnecessary expenses or increasing your income.
70% of Americans say their financial planning needs work.
If you feel like you don’t have enough tools in your toolbox to make the financial decisions in your life, you’re not alone. Enlisting the help of a financial planner or coach can help you ensure you reach the goals you have outlined for your life. No goal is too big or too small and the time to start saving is today!
I offer a free initial call to those seeking out expert advice in budgeting and managing debt, you can schedule here.
16% of Americans say they have more debt than before the pandemic.
The pandemic created a financial mess in our lives, lost jobs, reduced hours, business closures and so much more. The key takeaway is that we don’t have complete control over our lives but we should always be doing our best to prepare and move on from financial hits we take.
If you have increased debt, create a plan to pay off your debt and increase your savings to reduce the amount of debt you might have to take on in the future.
It’s also smart to think about diversifying your income. If you were to lose your job today, how else would you make money? When we have multiple income streams we are adding a layer of protection in case our employment changes.
Only 24% of Millennials demonstrate basic financial literacy.
While this stat is scary for millennials, I am not sure it’s any better for Gen X or Gen Z. A basic understanding of expenses, income, assets, liabilities, tracking spending and creating a budget is crucial to your financial success.
The ball is in your court to improve your financial literacy. By gaining basic knowledge in managing your income, debt and assets you’ll be able to set yourself up to build real wealth to reach your future retirement goals.
A key takeaway from these statistics is that no matter how bad you think your finances are, you’re not alone and hiding from the problem will never make it go away.
5 Unhealthy Money Habits That Lead to Excessive Stress
There are a lot of things that can cause worry when it comes to money. Do we have enough for retirement? What happens if the car breaks down? Can we afford to go on a family vacation this year?
Don’t let money stress scare you off from changing your financial situation. Acknowledging where we are financially is the first step to gaining clarity and reducing stress. Here are five money habits to avoid while trying to reduce stress.
Focusing Too Much on the Future
Saving for your future, having a rainy day fund and setting some money aside for an emergency are all important aspects to managing your money with less stress, but only to a point. It is crucial that we are enjoying today because we don’t know if we’ll have another tomorrow.
In addition to preparing for your future, set money aside each month to have a little fun. Whether you dabble in the music scene, have an expensive hobby or enjoy wine with friends, don’t let a limiting mindset stop you from actually living.
Trying to Keep Up With the Joneses
We’ve all been guilty of wanting something because it looks cool or we hope it will make us feel better about our life. But if we are constantly chasing someone else’s dream, where does that leave us with our own dreams?
Take a look at all of your spending and ask yourself, is this something that is truly important in my life? If so, great! If not, maybe it’s time to let it go.
And now is not the time to be worried about sunk costs that you already have invested, you’ll be saving yourself more money in the long run by quitting now versus later.
Being Stuck in a Job You Hate
Chances are your stress is high if you are at a job strictly for the pay or the benefits. We often feel like we don’t have a choice or we should be grateful if we are able to make a livable wage but I ask you, can we not raise the bar?
With increased stress, you might find yourself drinking more, have more stressful weekends fearing Monday or be unable to contribute to your household in a way your partner might prefer.
All of these events may not make the pay or benefits worth it in the end. You may also discover that you’d be able to survive off less money each month if you lived a more curated life.
If you don’t look forward to your job each week, click here for additional resources.
Hiding Money Secrets From Your Partner
When we hide things from our partners everything immediately becomes more stressful. We have to keep up with the lies we have told, hide transactions from accounts, come up with excuses for missing money and an assortment of other stressful events.
Having honest and open money conversations with your partner can result in reduced stress and anxiety, and can even help improve your financial situation.
Feel Pressure to Hit Societal Goals
Have you ever thought that you should have your student loans paid off by a certain age or that you will reach retirement by another age? The stress comes into play when we make these promises to ourselves as goals are unattainable, don’t speak to our true desires or aren’t taken seriously by following a plan.
Worse yet, we can start to have feelings of failure when we are off track in reaching these goals even if the reasoning behind the goal was societal pressure, not our true desires.
Don’t choose your goals simply by what a friend wants to accomplish or will make your mother proud. Choose one that will speak to your soul.
My Debt Free Journey Started With a Pressure Cooker
I am a big believer in having as little debt as possible, but probably not for the reason you are thinking. There are actual physical, emotional and financial reasons for you to get rid of your debt.
When I was on my journey to getting rid of my student loans I was stressed constantly! And the ironic part was that I couldn’t afford the occasional massage, because I had no money, and I couldn’t relax by curling up on the couch because I was working all the time.
Symptoms of financial stress are real, here are a few of the big ones:
The first real reason to get rid of your debt is that you are carrying less risk, hello 2020. Lose your job? Pay cut? I dropped from 40 hours/week to 20 hours/week basically overnight at my dayjob because of the pandemic, and that was way more stressful than my previous student loan stress. But since my loans were paid off, I just had to reevaluate my budget and watch my spending. Even though I didn’t have extra money, I wasn’t wasting what little money I did have on debt payments.
A better credit score is another. Sure, debt is a factor for a good credit score but it’s not that simple. You can have too much debt which would end up costing you thousands of dollars of interest for that next house, car or boat you’ve been eyeing up because you didn’t qualify for a better interest rate. And debt is actually a very small percentage of this score. The only debt I have is a mortgage and I pay my credit card in full every month and my rating is still excellent, it can be done!
Better cognitive function is next up. Yup, this is proven! Studies show that experiencing poverty impaired people’s attention span, working memory, and self-control. Did someone say self control? Have I ever mentioned that I once bought a pressure cooker on an infomercial before Instapot was even a thing? Yeah, I couldn’t afford it and who knows why I thought I needed one. Now I have the pleasure of a kitchen appliance that weighs a ton that I use once a month when I decide to make rice. Fortunately, studies also show that paying off debt reverses these problems!
Less chronic pain is another real benefit to getting rid of your debt. People with high levels of stress caused from debt were more likely to experience migraines, back pain and general muscle tension. They were also more likely to buy over-the-counter painkillers.
Money Crashers goes into thirteen other reasons you will want to get rid of your debt. The general consensus is that debt is bad, we all know that. But maybe you will see some of your symptoms on this list, just like I did. And maybe it will be enough for you to take the steps to pay down any unnecessary debt to improve your finances along with your mental and physical health.
Habits of a Millionaire, Just in Time for the Holidays?
Let’s get straight to the point. Budgets are the key to building wealth and while you might know the importance of one, I don’t know if you are giving them as much credit as they deserve.
Ramsey Solutions, the Dave Ramsey empire, conducted the largest survey of millionaires, with over 10,000 participants, all to find out what some of the common trends were.
Here is what they found:
8 out of 10 invested in their company 401k
79% did not receive an inheritance
Only 31% averaged $100,000 a year over the course of their career (and one-third never had a six-figure salary)
The average millionaire made a habit of budgeting every month
Since the holidays are here, and 52% of us Millennials are going into debt because of it, I’m here to offer a solution. Don’t wake up in January with your credit cards maxed, desperate to cure your holiday hangover, let’s change the path you might be headed down.
Here is a free, easy-to-use template to get your holiday budget created today! Use this spreadsheet to organize your holiday spending categories, assign dollar amounts to avoid debt and record your transactions to help you stay within budget!
While this year’s budget may not be fancy, we only have a month until the big holiday so let’s be realistic with how much you can save, I want you to know that it’s ok. 2020 has tested us, pushed us and prodded us to act differently.
So here we are, creating a budget, changing our spending habits and building a future for ourselves because we deserve more than just going to work and paying our bills. Thanks 2020 for the wakeup call.