In the 1st quarter of 2019, US consumer debt reached $14 trillion according to Ben Mohr, senior research analyst of fixed income at Marquette Associates. You\u2019d figure the 2008 financial crisis would’ve taught Americans’ valuable lessons about debt and savings, but on the contrary, consumer debt is historically high while the US personal savings rate remain at it’s lowest level since the mid-2000s. In fact, a recent Federal Reserve survey claimed 35% of U.S. adults reported that they would not be able to pay all of their bills if faced with a $400 emergency. The majority of this total household debt is mortgage debt [no surprise there], while other debts include credit cards, auto, personal and student loans.<\/p>\n
Now, there\u2019s actually nothing wrong with taking on \u2018cheap debt,\u2019 actually it\u2019s the best time to take on debt. In fact, a\u00a0strong demand for home ownership, historically low interest rates and rising house prices have resulted in just that \u2013 increased levels of debt. But the amount of debt should be \u201caffordable\u201d even if interest rates were to rise or unforeseen circumstances, such as a spousal lay off, suddenly resulted in a lower household income. Wouldn\u2019t it be better to take on a level of debt that will also allow you enough leeway to take annual vacations, while saving into your retirement nest egg?\u00a0Nobody really knows when the next financial implosion will occur, but let\u2019s face it, debt management may seem cozy at the moment\u2026until it isn\u2019t.<\/p>\n
\u00a0<\/p>\n
2. Most Americans live paycheck to paycheck<\/strong><\/h3>\nAccording to a recent report from CareerBuilder, nearly 8o% of American workers, including 10% of those who make more than $100,000 a year live paycheck-to-paycheck. Shocking! The same report claims nearly 75% of workers say they’re in debt today with more than 50% of them saying they’ll never be debt-free.\u00a0Even the \u201crich\u201d six-figure income earners are not immune from facing financial difficulty as they increase their spending in correlation with their income. In a recent survey by GoBankingRates, nearly a quarter of respondents with incomes of US$150,000 or more had less than $1,000 set aside for emergencies and one in three had nothing saved for retirement. Though alarming, it isn\u2019t surprising considering possible culprits include Mortgage-related debts, Credit card debts, Student loans and even higher cost of living.<\/p>\n
In a separate recent report, the US Federal Reserve reported total credit card debt had reached its highest point ever in US history, surpassing $1 trillion. One reason for this could be that credit card interest is so high and combined with compound interest, you would barely make a dent to your growing balance with \u201cconvenient\u201d minimum payments.\u00a0 And there\u2019s the trap! Compound interest<\/strong>\u00a0is a topic best left for another day but just realize that it\u2019s\u00a0good for investments<\/em>\u00a0but\u00a0bad for debt<\/em>. \u00a0It still amazes me when financial publications or financial websites offer reviews for \u201cBest Credit Cards.\u201d Isn\u2019t that an oxymoron? There\u2019s no such thing as the \u201cbest\u201d credit card \u2013 it\u2019s a debt tool!<\/p>\nMany would argue for the value of points and rewards obtained when using their credit card for \u201cexpenses they would pay anyways.\u201d The problem is it\u2019s convenience causes consumers to rack up a bill much higher than they expect until the bill arrives at a later date and SURPRISE! How did this happen?!? Remember, with credit cards you\u2019re not paying with your money, you\u2019re\u00a0borrowing<\/em>\u00a0someone else\u2019s money to\u00a0 make purchases. What good are points and rewards if you sink into a debt you can\u2019t get out of? It\u2019s a brilliant system to keep you in debt while you make \u2018profitable\u2019 minimum payments.<\/p>\n\u00a0<\/p>\n
3. US home prices are expected to rise at twice the speed of inflation and wage growth. The beginning of a crisis?<\/strong><\/h3>\nAverage home prices are significantly higher than they were at the peak of the housing bubble in 2006, according to the S&P Case-Shiller national home price index. The combination effect of personal disposable incomes not accelerating at the rate of overvalued<\/em>\u00a0homes and supply not keeping pace with demand,<\/em>\u00a0making home ownership less affordable\u00a0<\/em>present\u00a0a \u2018red alert\u2019 situation for the personal finances of many American households.<\/p>\nWe\u2019re well aware that record low interest rates and stimulus spending have been the driving force behind this housing market frenzy. With greater demand came higher prices \u2013 simply because people are willing to pay for it. But let\u2019s consider several plausible \u201cwhat if\u201d scenarios.\u00a0 What if there\u2019s an economic downturn resulting in lower than expected job growth? \u00a0We already know that most Americans are living paycheck to paycheck. What impact will trade deal disturbances with China, Canada and Mexico have?\u00a0 What are the implications if interest rates rise too fast? How will American pocketbooks be affected if consumer debt levels and cost of living rises, including higher oil, gas and energy prices?<\/p>\n
I think we can all agree that any one of these scenarios can potentially cause decreased borrowing resulting in decreased demand. With demand falling, people may not be so willing to pay for such record high prices for homes. For those who have already locked themselves into a record sale purchase, it may be tough to resell at an equal or greater price, forcing themselves to hold on to the property. This scenario would give them \u00a0less \u201cwiggle room\u201d to cover emergency expenses, take a dream vacation, or as the following point illustrates, money left over to save and invest for retirement.<\/p>\n
![\"hires\"](\"https:\/\/www.solowealth.com\/ca\/blog\/wp-content\/uploads\/2016\/11\/HiRes-500x286.jpg\")
<\/p>\n
4. Fact: Most Americans are not saving enough for retirement. Cheers to your semi-retirement!<\/strong><\/h3>\nAccording to a report from GoBankingRates, over 40 percent of Americans have less than $10,000 saved for retirement and those nearing retirement with savings, only have around $120,000 for their nest egg – not enough to afford a retirement once the paychecks stop coming in. The main barriers to saving were reported as “Expenses” and “Job isn’t good enough.” What does this mean? About 40% of Americans are expected to retire broke with women still lagging behind men in retirement savings. According to the Social Security Administration, we are living longer which is great, but saving less which will have a detrimental financial impact, especially on those among us without a company retirement pension. This may suggest that ‘semi-retirement’ could be the new norm for Americans.<\/p>\n
The consequences could result in: serious debt if income stops coming in, with dependence on high interest loans including credit cards to compensate for the shortfall; increase in stress associated with financial hardship and an inability to strive towards goals diminishing your quality of life.<\/p>\n
\u00a0<\/p>\n
5. Most Americans don\u2019t have a financial plan. Having one \u2018in your head\u2019 doesn\u2019t count.<\/strong><\/h3>\nAccording to Charles Schwab, only 25% of Americans have a financial plan! Some of the top reasons cited for this inadequacy included: ‘they don’t think they have enough money to justify a financial plan, the idea of a financial plan never occurred to them, or they wouldn’t know how to begin getting a plan.’\u00a0Joe Vietri, senior vice president and head of Schwab\u2019s retail branch network, says\u00a0\u201cthe idea that financial planning and wealth management are just for millionaires is one of the biggest misconceptions among Americans and one of the most damaging,…the longer they wait the harder it is to achieve long-term success.\u201d<\/p>\n
Why do such conflicts exist even though there\u2019s easy access to financial services in the financial industry? Clearly there are a few problems that need to be addressed. First, how can people access the services they need at a price they can\u00a0afford<\/em>? Not everyone can justify spending thousands of dollars to simply hire a \u2018financial quarterback.\u2019 Second, if a decision is made to hire a professional, there are so many credentials, designations and options out there, it\u2019s difficult to determine who to hire, making the process seem more complicated than it really is. Third, it doesn\u2019t help that financial firms charged embedded fees creating distrust among potential clients. Let’s face it,\u00a0\u00a0if you\u2019re a fund manager and you\u2019re being paid based on the size of your client\u2019s account and the amount of the trailer fee, what incentive would you have to care as much about the \u201cperformance\u201d of the fund? It\u2019s no wonder such discrepancies have given rise to a growing trend of\u00a0online wealth management services<\/strong><\/a>\u00a0that are more accessible, affordable and transparent.<\/p>\nAre you starting to notice the calm before the storm? This is an issue of accountability of our actions<\/em> and habits<\/em> which a government bailout cannot solve.\u00a0What should you be doing to minimize the impact of this financial storm? The key here is\u00a0preparation!\u00a0<\/em>Gather all of your materials, supplies and resources to make sure you\u2019re ready. To accomplish this, It doesn\u2019t matter if you use the\u00a0solowealth financial plan<\/strong>\u00a0or hire a financial planner, as long as you have a PLAN! By placing you in the driver\u2019s seat, the\u00a0solowealth financial plan<\/strong>\u00a0dispels common excuses about\u00a0cost<\/em>,\u00a0confusion\u00a0<\/em>and\u00a0trust<\/em>. The only excuses it can\u2019t address are\u00a0complacency<\/em>\u00a0and\u00a0lack of motivation<\/em>. The question you should ask yourself is: \u201cIf I address all 10 steps of the\u00a0do-it-yourself\u00a0<\/strong>solowealth financial plan<\/strong><\/a>, will I be better off than I am now?\u201d Given the evidence presented, the answer is obvious.<\/p>\nIt\u2019s never too early to prepare and make the coming year your most financially prosperous yet!<\/p>\n\n\n
<\/p>\n","protected":false},"excerpt":{"rendered":"You can choose to be in denial but unless specific actions are taken, the average American is vulnerable to a potential financial implosion…","protected":false},"author":1,"featured_media":177,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[2,9],"tags":[],"_links":{"self":[{"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/posts\/175"}],"collection":[{"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/comments?post=175"}],"version-history":[{"count":3,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/posts\/175\/revisions"}],"predecessor-version":[{"id":216,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/posts\/175\/revisions\/216"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/media\/177"}],"wp:attachment":[{"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/media?parent=175"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/categories?post=175"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/tags?post=175"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
Many would argue for the value of points and rewards obtained when using their credit card for \u201cexpenses they would pay anyways.\u201d The problem is it\u2019s convenience causes consumers to rack up a bill much higher than they expect until the bill arrives at a later date and SURPRISE! How did this happen?!? Remember, with credit cards you\u2019re not paying with your money, you\u2019re\u00a0borrowing<\/em>\u00a0someone else\u2019s money to\u00a0 make purchases. What good are points and rewards if you sink into a debt you can\u2019t get out of? It\u2019s a brilliant system to keep you in debt while you make \u2018profitable\u2019 minimum payments.<\/p>\n \u00a0<\/p>\n Average home prices are significantly higher than they were at the peak of the housing bubble in 2006, according to the S&P Case-Shiller national home price index. The combination effect of personal disposable incomes not accelerating at the rate of overvalued<\/em>\u00a0homes and supply not keeping pace with demand,<\/em>\u00a0making home ownership less affordable\u00a0<\/em>present\u00a0a \u2018red alert\u2019 situation for the personal finances of many American households.<\/p>\n We\u2019re well aware that record low interest rates and stimulus spending have been the driving force behind this housing market frenzy. With greater demand came higher prices \u2013 simply because people are willing to pay for it. But let\u2019s consider several plausible \u201cwhat if\u201d scenarios.\u00a0 What if there\u2019s an economic downturn resulting in lower than expected job growth? \u00a0We already know that most Americans are living paycheck to paycheck. What impact will trade deal disturbances with China, Canada and Mexico have?\u00a0 What are the implications if interest rates rise too fast? How will American pocketbooks be affected if consumer debt levels and cost of living rises, including higher oil, gas and energy prices?<\/p>\n I think we can all agree that any one of these scenarios can potentially cause decreased borrowing resulting in decreased demand. With demand falling, people may not be so willing to pay for such record high prices for homes. For those who have already locked themselves into a record sale purchase, it may be tough to resell at an equal or greater price, forcing themselves to hold on to the property. This scenario would give them \u00a0less \u201cwiggle room\u201d to cover emergency expenses, take a dream vacation, or as the following point illustrates, money left over to save and invest for retirement.<\/p>\n According to a report from GoBankingRates, over 40 percent of Americans have less than $10,000 saved for retirement and those nearing retirement with savings, only have around $120,000 for their nest egg – not enough to afford a retirement once the paychecks stop coming in. The main barriers to saving were reported as “Expenses” and “Job isn’t good enough.” What does this mean? About 40% of Americans are expected to retire broke with women still lagging behind men in retirement savings. According to the Social Security Administration, we are living longer which is great, but saving less which will have a detrimental financial impact, especially on those among us without a company retirement pension. This may suggest that ‘semi-retirement’ could be the new norm for Americans.<\/p>\n The consequences could result in: serious debt if income stops coming in, with dependence on high interest loans including credit cards to compensate for the shortfall; increase in stress associated with financial hardship and an inability to strive towards goals diminishing your quality of life.<\/p>\n \u00a0<\/p>\n According to Charles Schwab, only 25% of Americans have a financial plan! Some of the top reasons cited for this inadequacy included: ‘they don’t think they have enough money to justify a financial plan, the idea of a financial plan never occurred to them, or they wouldn’t know how to begin getting a plan.’\u00a0Joe Vietri, senior vice president and head of Schwab\u2019s retail branch network, says\u00a0\u201cthe idea that financial planning and wealth management are just for millionaires is one of the biggest misconceptions among Americans and one of the most damaging,…the longer they wait the harder it is to achieve long-term success.\u201d<\/p>\n Why do such conflicts exist even though there\u2019s easy access to financial services in the financial industry? Clearly there are a few problems that need to be addressed. First, how can people access the services they need at a price they can\u00a0afford<\/em>? Not everyone can justify spending thousands of dollars to simply hire a \u2018financial quarterback.\u2019 Second, if a decision is made to hire a professional, there are so many credentials, designations and options out there, it\u2019s difficult to determine who to hire, making the process seem more complicated than it really is. Third, it doesn\u2019t help that financial firms charged embedded fees creating distrust among potential clients. Let’s face it,\u00a0\u00a0if you\u2019re a fund manager and you\u2019re being paid based on the size of your client\u2019s account and the amount of the trailer fee, what incentive would you have to care as much about the \u201cperformance\u201d of the fund? It\u2019s no wonder such discrepancies have given rise to a growing trend of\u00a0online wealth management services<\/strong><\/a>\u00a0that are more accessible, affordable and transparent.<\/p>\n Are you starting to notice the calm before the storm? This is an issue of accountability of our actions<\/em> and habits<\/em> which a government bailout cannot solve.\u00a0What should you be doing to minimize the impact of this financial storm? The key here is\u00a0preparation!\u00a0<\/em>Gather all of your materials, supplies and resources to make sure you\u2019re ready. To accomplish this, It doesn\u2019t matter if you use the\u00a0solowealth financial plan<\/strong>\u00a0or hire a financial planner, as long as you have a PLAN! By placing you in the driver\u2019s seat, the\u00a0solowealth financial plan<\/strong>\u00a0dispels common excuses about\u00a0cost<\/em>,\u00a0confusion\u00a0<\/em>and\u00a0trust<\/em>. The only excuses it can\u2019t address are\u00a0complacency<\/em>\u00a0and\u00a0lack of motivation<\/em>. The question you should ask yourself is: \u201cIf I address all 10 steps of the\u00a0do-it-yourself\u00a0<\/strong>solowealth financial plan<\/strong><\/a>, will I be better off than I am now?\u201d Given the evidence presented, the answer is obvious.<\/p>\n It\u2019s never too early to prepare and make the coming year your most financially prosperous yet!<\/p>\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":"You can choose to be in denial but unless specific actions are taken, the average American is vulnerable to a potential financial implosion…","protected":false},"author":1,"featured_media":177,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[2,9],"tags":[],"_links":{"self":[{"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/posts\/175"}],"collection":[{"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/comments?post=175"}],"version-history":[{"count":3,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/posts\/175\/revisions"}],"predecessor-version":[{"id":216,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/posts\/175\/revisions\/216"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/media\/177"}],"wp:attachment":[{"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/media?parent=175"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/categories?post=175"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.solowealth.com\/blog\/wp-json\/wp\/v2\/tags?post=175"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}3. US home prices are expected to rise at twice the speed of inflation and wage growth. The beginning of a crisis?<\/strong><\/h3>\n
<\/p>\n4. Fact: Most Americans are not saving enough for retirement. Cheers to your semi-retirement!<\/strong><\/h3>\n
5. Most Americans don\u2019t have a financial plan. Having one \u2018in your head\u2019 doesn\u2019t count.<\/strong><\/h3>\n