Unsettling Financial Statistics You Might Not Want To Hear

Seeking out financial advice to create a solid financial plan is a task often accompanied by a bit of stress and a lot of numbers. It's common to run into quite a few distressing figures on your search for better money management tactics: Like the fact that most Americans can't cover a $1,000 emergency expenditure with their savings.

But running up against these kinds of troubling financial facts can act as a kind of roadmap for those seeking to build a stronger future. In looking for signs that your finances are on the right track, if you come across a stat like that and know that it doesn't apply to you, then you're moving toward increasingly durable financial footing. These statistics might be a little unsettling, but they point to both weaknesses in the average American's budgetary math (as well as some larger societal failings in the financial space) and act as a challenge for those hoping to right their ship. Taking up the challenge that they lay down is a decision of courage, but also one that must be done in order to create lasting financial stability that will support your lifestyle and housing needs, your family, and ultimately, your retirement aspirations.

Only 22% of Americans closing in on retirement say they have enough to afford it

As you approach the final years before Social Security payments kick in to support your life after the paycheck, saving for retirement takes a leading role in budgetary decisions. Unfortunately, 78% of Americans getting close to retirement age aren't prepared to afford these golden years. The best way to save for retirement is to let time handle the bulk of the heavy lifting. Generally, money invested in the stock market doubles every seven years. So the longer you leave your money to work for you, the more it will be able to grow all on its own.

While older Americans who lack retirement savings may find themselves exceedingly behind the ball when it comes to enjoying the most expansive fruits of compounded interest, it's never too late to start saving. Save as much as you can afford and prepare to work for as many additional years as necessary. A person born in 1960 (or later) can start their retirement at 67 with 100% of their benefits or choose to start drawing Social Security as early as 62 years old and take a 30% benefit decrease. Alternatively, adding three more years of work (retiring at 70) provides a 124% Social Security payout and three additional years of salary that can support critical savings goals in the final runup to leaving the workforce.

51% of Americans have delayed at least one important life decision based on finances in the last year

More than half of all American adults say they've delayed an important life decision as a result of financial pressures. This might be the decision to purchase their first home or family planning matters like getting married or trying to start a family. This feature of the American economy isn't one that hits any two people the same, instead, it's more of an atmospheric sensation. More importantly, the idea that more than half of Americans have had to forego an important life decision or push it back signals the essentiality of money in the everyday thinking and planning of every consumer.

It's easy to think of life's many facets as individual and unconnected. Yet, finances factor into virtually everything you do, whether large or small. Understanding that your financial circumstances may end up putting important life choices and goals on hold can light a fire under you to maintain healthy money habits and start saving toward future goals.

Mortgage rates have hit a decade-long high

For anyone hoping to purchase a home in the near future, the reality of steadily rising mortgage rates is a truly terrifying thought. Locking into a high interest rate for the next 25 or 30 years is the stuff of nightmares. Not only will the monthly payments be larger, but the total expense of a home will be significantly higher. A 1% jump in your interest rate translates into about $100 extra per month in repayments. At the current national average of 7.75% (as of November 2023), you're looking at a hyper-inflated repayment schedule. Compared to the 2.72% at the same point in 2019 (and just prior to the economic turmoil that would accompany the pandemic), you're on the hook for roughly $500 more per month, adding up to about $6,000 more over just one year.

This means that for many, even if saving for a home has been a part of the plan for years, it may not be financially viable to buy right now. This is tough news, especially for those who have put in the effort and saved enough for a down payment and other home-buying expenses. The extra toll attached to these astronomical mortgage rates means that it might be a better idea to wait out the market in the hopes that it cools off. An Adjustable Rate Mortgage (ARM) or variable rate may also help you get a price cut on mortgage funding, too.

24% of Americans have no savings for emergencies

Perhaps one of the most disturbing financial facts about American spending and savings habits is that almost one-quarter of Americans don't have any savings set aside to cover emergency spending needs. This savings goal is separate from retirement or general savings entirely. It's not meant to sit idly by for the long term, picking up dividends or interest payouts that will serve you later in life. Instead, emergency savings should be set into a bank account that can be easily accessed—ideally the same day you need the funds—and withdrawn to cover emergencies. These can be sudden doctor visits for your children, the need to replace a punctured tire, or a broken window at home.

Expert advice suggests building emergency savings funds up so that the cash can cover all your typical expenses for three to six months— enough to maintain yourself through a lengthy financial struggle. But even setting aside $100 for the inevitable unexpected spending demand will serve you well. If you're one of the 24% of people with no emergency savings, start small. Three months' worth of expenses can feel like an impossible mountain to climb, but you don't need to reach that summit just yet. A more attainable waypoint will guide your journey forward, kickstarting a truly essential financial feature in any budget.

And 56% can't afford to cover a $1,000 emergency

As mentioned earlier, most Americans don't have the ability to dip into an emergency savings pool to cover a $1,000 expense without relying on external support—like that of a credit card. The figure is 56%, to be exact. And roughly 30% of Americans would opt to pay for this kind of hypothetical emergency specifically with a lending product (credit card, personal loan, etc.) if faced with the decision.

While most emergency spending needs aren't likely to rise to this level, it's not out of the question that a burst pipe in the house or a car accident on your commute will pose a more severe financial threat than a typical repair. The reality is that relying on personal loans or credit cards to stave off a sudden emergency is the worst possible approach, yet, a great many people will have to resort to these financial products. The gigantic interest rate on even the most favorable credit card ensures that when unexpected expenses burst your budget wide open, you'll end up spending months, if not years, repaying the overage. The importance of emergency savings cannot be overstressed. Starting small and building momentum will produce a much stabler foundation that creates potent knock-on effects.

U.S. homeowners owe a collective $13.37 trillion in mortgage debt

Mortgages have consistently offered the best avenue to enter into homeownership. The price of a home continually rises with inflation and an ever-more demanding marketplace. Between 1992 and 2023, the House Price Index averaged 4.58% year over year, with a notable spike in 2021 that bled over into 2022. The rising cost of homeownership correlates with a growing reliance on mortgage products, and in 2022, the collective mortgage debt among American homeowners reached a new high, at $13.37 trillion (considering one-to-four-family residences).

This figure has been rising steadily since 2014 and in 2020, eclipsed the previous 2007 peak. A growing reliance on residential lending products signals the potential for a growing, systemic weakness in the financial system. Generally speaking, experts point to explosive borrowing trends as a sign that something is amiss in the economy. When things are booming, consumers generally have ample funds to spend on purchases. While the housing space is fundamentally different than buying peanut butter or PlayStations, the same lessons apply. The housing market crash that roiled the entire global financial system came on the heels of extreme lending practices that saw virtually anyone gaining mortgage approval. A growing volume of debt in this sector should raise the eyebrows of astute borrowers, investors, and consumers (in other words, just about everyone).

Black and Hispanic families make up a disproportionate share of household incomes under $25,000

Systemic failings remain a feature of the system rather than a byproduct. Another unsettling fact regarding the American financial landscape surrounds demographic income distribution. The reality is that Black and Hispanic families make up a vastly disproportionate number of low-income households across the country. 41% of Black families earn less than $25,000, and the figure is 42% for Hispanic families, compared to 21% and 22% respectively for white and Asian families. Overall, 28% of family households regardless of demographic fall into this category. While Asian and white families come in slightly below the average, Black and Hispanic households are seriously behind the curve. The same can be said for both groups concerning households making more than $100,000 per year.

Experts suggest that a correlation exists between education level and earnings potential. A study by Georgetown University Center on Education and the Workforce found that the average worker with a bachelor's degree will earn roughly $2.8 million throughout their career, compared to an average earnings figure of $1.6 million for those with a high school diploma. Moreover, additional educational attainment leads to additional earnings, on average, although this will certainly vary by profession. The takeaway is that education matters significantly for those looking to change the narrative for themselves or their children. While there may be nothing you can do about systemic injustices on your own, investing in your education can tip the scales in your favor.

Only 45% of those without a high school diploma considered their finances to be okay in 2020

In studies conducted by the Federal Reserve, those without a high school diploma have consistently self-reported "doing okay financially" at notably lower rates than workers with more education. In 2020, there was a steep drop off from the 54% who reported doing okay in the prior year.

Coinciding with closures due to the pandemic, this downturn shows the potential link between lower educational attainment and workplace opportunities that rely on in-person interaction (within the service industry or the trades, for instance). But the trend didn't emerge only after shutdown orders came into place. The reality is that education opens doors for new and lucrative opportunities. It's worth noting that going to college doesn't guarantee a great job, but it can help create more accessibility in the job marketplace. This statistic is an important feature of the economy to consider for anyone thinking of leaving school early to pursue a trade or any other type of work. This isn't to say that someone passionate about a certain trade skill or any other job that might not require a high school diploma for entry shouldn't chase after that dream. Instead, it points to a landscape of greater potential instability for those who choose (or are forced down) this route.

$23,325 is the average debt for American adults (not including mortgages)

Americans carry a sizeable amount of debt around with them. Not including mortgage lending, American borrowers owe their creditors an average of more than $23,000. This yardstick isn't a great indicator of whether you're better or worse off than the average American, though. Everyone has their own blend of debt, and no two employees will receive the same kind of compensation. Moreover, your individual expenses are unique, including those involving debt repayment. One borrower might owe nothing in credit card debt while paying off a sizeable car loan, while another may only owe on credit card spending.

Instead, the fact that most Americans owe a decent chunk, if not the lion's share, of their yearly income to lenders signals the inherent weakness of workers. The typical American may not feel a whole lot of workplace leverage when it comes to negotiating a raise or saying no to their boss when asked to do something beyond their responsibilities. Combined with the fact that most Americans haven't saved enough to cover a lengthy outage in income, a sizeable amount of debt means that monthly expenses aren't just dictated by personal choice. Tightening your belt through hard times can work if your only outgoings are splurge purchases and groceries, but this calculation looks a little different when a notable portion of each paycheck has to be spent on debt repayment.

High earners also live paycheck to paycheck

62% of Americans live paycheck to paycheck. This harsh budgeting reality means that some discretionary spending must be put on hold as a rule rather than an exception each month. For many Americans, it can seem like only "the rich" can live above the constant worry over earning enough to pay for everything on a routine basis. But stats indicate that many higher earners are also stuck in a cycle of monthly math. 18% of American employees earning over $100,000 per year also live paycheck to paycheck, signaling that monetary fragility can be found across the U.S. economic landscape.

This showcases that people of all income brackets can make smart or silly financial decisions. While there are many mandatory spending requirements in any household budget (transportation, food, personal care items, etc.), a budget is also filled with choices. Anyone can choose to live in a home that's too expensive for their earnings. The same can be said for clothing purchases, cars, and self-care purchases like a new set of golf clubs, household decorations, or a new TV. No matter where your earnings fall, smart spending habits can help you create separation between your monthly earnings and the expenses that drain your accounts. Living paycheck to paycheck is stress-inducing, but anyone can create a savings plan that helps reduce this financial vulnerability.

83% of American adults have at least once credit card (and the average is four)

Credit cards are truly universal in the modern financial world. It's hard to think of the monetary system without the augmentation of lending products, but their level of penetration is perhaps greater than might be understood by the average American. 83% of adults in the United States have at least one credit card, signaling the enormous scope of their impact on everyday finances. On another note, the average American has roughly four cards (3.84 credit cards) and a credit limit of $30,365.

The financial mobility that comes through access to improved lines of credit can be transformative. Rewards credit cards, for instance, offer great benefits for responsible users who pay down their balances every month. But the more reliant you become on credit card accounts, the easier it is to fall behind on payments, making everyday purchases astronomically more expensive. Of course, using credit cards sparingly is an important financial task. Using your credit card creates an ongoing trend of responsible use that can dramatically raise your credit score over time. It's worth remembering how entrenched the credit industry is in global and American finances, as it makes vigilance while using credit products a bit easier to practice.

Less than 17% of high schoolers are required to take financial literacy courses

Of all the truly fear-inducing financial facts that you might come across, learning that American high schoolers aren't being trained to manage their money intelligently — almost as a universal rule — even though many will become full-fledged adults before leaving the classroom. Only about 17% of high school students are required to enroll in a financial literacy course as a part of their education. Math, science, and English courses are mandated, and for good reason, but learning to budget and save for the future remains an underappreciated skill that our society simply isn't teaching its young adults. Moreover, not only is this type of learning not required, 30% of high school students don't even have the option to take a financial literacy class at school.

For young people seeking answers about how to manage their money, leaning on parents and other personal mentors remains the most reliable way to distill financial wisdom (even if that knowledge isn't quite accurate). Seeking financial advice is crucial for young people, particularly around the time they get their first job in the local community. A sudden influx of earned capital can be irresponsibly spent in a heartbeat, or managed intelligently for a variety of short and long term plans. There's nothing wrong with splurging, especially in this stage of youth, but internalizing the lesson that paychecks are for spending is a surefire way to face a lengthy timeline of fiscal grief.