Financial Rant: Americans, We Can Do Better Financially

I feel a rant coming. I hope you can understand and forgive.

It’s been over 2 months of shelter-in-place order (or stay-at-home as NY Governor Cuomo likes to call it) due to COVID-19. 

I hesitate to go out shopping or even to go out. 

I love to travel but I have to cancel all my travel plans for this year. 

On top of that, the airlines won’t even give me my money back. They provided me only a credit to be used within a year or two. 

Oh great, now when the airlines go belly up, I’ll be one out of a million unsecured creditors they have. 

I haven’t enjoyed a nice meal out with my wife and family during this time. Given I live in Manhattan, I do so enjoy eating out ever so often at the numerous restaurants in the city.

My three very energetic kids are home all day and my caregivers have opted not to commute to look after them. 

Remote learning has not been the easiest with technology issues. Not to mention, at times I have to double as a teacher.

And if that wasn’t enough, I have to juggle all that with my full time job. 

I know I’ve been fortunate to have my family and friends safe. Not to mention, a lot of people are experiencing tougher situations. 

I should stop whining. 

Nevertheless, I need to let off some steam.

It’s a good thing I have this blog.

But I don’t think you are interested in what’s going on with my life. 

This is a personal finance blog after all. Got to stick to the topic at hand.

I know. 

I have the right topic to vent my frustration…

Americans – We Can Do Better  

I mean it from a financial standpoint. Americans can do better financially.

This pandemic has exposed the dark underbelly of the beast when it comes to most Americans’  financial situation. 

There are a lot of families in financial distress due to this once in a century type event. 

Over the course of my work life, I’ve experienced 3 major economic disruptions in 20 years. 

First came the internet bubble bursting in the early 2000’s. It was coupled with the horrific 9/11 attacks.

Then came the Great Recession in the late 2000’s. This was followed by a great decade bull run in a number of asset classes including stocks, bonds and real estate.

And now we have COVID-19, a pandemic which caused tens of millions of Americans to lose their jobs. 

The past 20 years have taught me that it is hard to sustain an upward bull run without any sort of major disruption. 

We have to plan accordingly for when those major adverse economic events happen.

It is not a question of if, but when it will happen again.

I hope my fellow Americans will learn to do better heading into the next economic crisis than our preparation for this one.

Emergency Savings Are Dismissal – We Can Do Better

I don’t think anyone in the world back in the summer of 2019 could have predicted what was to unfold over the next year.

Countries had to take drastic measures to stop the spread of the COVID-19 virus. 

America is no different. Non-essential businesses were ordered to shutter their doors to prevent people from having contact with each other.

This resulted in a lot of businesses closing down and millions of employees out a job.

When this happens, I can see three options for the unemployed to survive: (1) rely on their savings, (2) depend on the government for help, or (3) depend on the kindness of strangers.

There is no doubt in my mind if I need to make a choice, which one I would pick.

When it comes to feeding my kids and ensuring they have a roof over their heads, I would never leave it up to others – not the government or the kindness of strangers.

Don’t get me wrong, I would seek and gladly accept help from the government or strangers if I am in a dire financial situation. There is nothing wrong with that.

But  I would never leave myself or my family exposed to only those two options.

That is why I find it appalling that according to Bankrate’s Financial Security Index almost three in 10 adults have no emergency savings at all.

And according to FINRA Investor Education Foundation, only 43% of Americans were certain they would come up with $2,000 in emergency savings in a month. Another 22% said they probably could. 

Almost half haven’t set aside money to cover expenses for three months.

Emergency savings is not only a nice to have, it is a necessity for when economic disaster strikes. Once again, it isn’t a matter of if, but when.

Come on now, we are ultimately responsible for the financial well-being of ourselves and our family members. 

It’s time to take responsibility. Let’s build up that emergency savings fund. 

Stop Spending Money We Don’t Have – Cut Up Our Credit Cards Now

One sure way to save some money is to go to our wallets now, take out all the credit cards and cut them up.

While you are at it, throw away all applications for new credit cards.

It is a sad state of affairs when, according to data released in 2018 by Bankrate, nearly one in five Americans (21%) say they have more credit card debt than emergency savings. 

Well, having anything more than emergency savings is not much of a surprise since as mentioned in the previous point, Americans just don’t save enough.

But what makes it worse is that we accumulate more credit card debt than we have savings.

It is not surprising Americans resort to credit cards when we are living paycheck to paycheck. When we want something, just put it on the credit card.

According to a Nielsen study, one in three families earning between $50,000 and $100,000 depend on their next paycheck to keep their heads above water. 

Even high earners are not immune to living paycheck-to-paycheck. One in four families making $150,000 a year or more are living paycheck-to-paycheck according to the same Nielsen study. 

When unexpected expenses occur, the credit card is where we go.

No wonder 38% of US households have credit card debt. On average, they owe about $16,000 with an APR of 16.5%. 

My goodness – 16.5% interest! – this is legal theft in America. 

Let’s not make ourselves victims by leaving a credit card balance and having to pay such an exorbitant interest rate.

Better yet – don’t use our credit cards at all. Just cut them up. 

Use Our Heads Early – Don’t Graduate With A Crippling Amount Of Student Debt

Let’s give ourselves a head start and not be buried in student debt before even depositing the first paycheck.

70% of American students end up taking out loans to go to college. The average graduate leaves school with around $30,000 in debt. 

Nearly half of the 22 million Americans with federal student loans are either behind on payments or received permission to postpone payments due to economic hardship.

Is that a surprise given that tuition at public four-year institutions has increased by 213% in the past 30 years?

College is okay if you majored in a field which can pay handsomely after graduation. 

But if you went to a 4 year school and left with a degree that can’t give you a realistic shot of earning an above average salary, then you have completely put yourself far back from the start line.

That is why college should only be a financial decision and nothing more. 

Finding yourself, meeting friends, partying or enjoying the college experiences are not valid reasons to go to college. 

You can do all that at a much more cost effective manner.

The only reason why you should pay for a college tuition is because the return on the dollar investment is there.

Otherwise, skip college because you can still get to millionaire status without a college degree.

Speaking Of Higher Learning – Let’s Get Educated On Personal Finance

I have no clue how to speak French.

Nor do I have any clue how to operate a NASA spacecraft or even a stick shift for that matter.

It isn’t a surprise to me because I never took the time to learn. I did no research. I never watched any videos or read any books about those topics.

At this point, I am okay with not knowing how to speak French (although it would be nice), operate a NASA spacecraft or drive stick. 

But what is not okay is not understanding basic finance topics and fundamentals .

Nearly two-thirds of Amercians can’t pass a basic test of financial literacy.

That is not a good statistic. 

How can we expect to accumulate wealth in America if we don’t even understand how interest works. 

According to a Forbes article, most people are completely unaware how much they are paying in interest or that there are several strategies to reduce the amount of interest they pay by a significant amount. 

If we want to do better financially, start educating ourselves on personal finance matters.

Following this blog is a great place to start.

Learn about the powerful force of compound interest, about mutual funds, the S&P 500 index, 401(k) plans, the interest rate on our credit cards, our mortgage rates, and a whole slew of financial topics.

It doesn’t have to happen all at once. But you should give yourself a one year period to be better verse.

That way, when we are asked to take the basic test of financial literacy next time, we will pass with flying color.

It’s Time To Plan For A Better Financial Future – Let’s Use A Budget

Do you use a budget to plan out your expenses or lay out a game plan on how to save? 

Judging by the dismal emergency savings rate, I highly doubt it.

According to Debt.com, I’m only partially right.

For age 22 and under, 50% use a budget. For the age range between 23 and 38 years old, 74% use a budget. This is the highest user group of budgets.

Then it drops to 67% for the age group between 39 and 54. And then finally for people 55 and over, 67% use a budget.

Surprisingly, a good number of us do have a budget. Kudos are in order. Keep it up!

Also, don’t forget to look at your actual earnings and expenditures against your budget at least once a month. 

This way, you can track your progress and make adjustments when needed to reach your goals.

For the rest of you who don’t have a budget, what are you waiting for?

Let’s get using a budget as soon as possible. 

Discuss With Your Spouse, Partner Or Significant Other About Financial Goals

There is an Afrian proverb:

“If you want to go fast, go alone. If you want to go far, go together.”

I encourage all my fellow Americans to strive to go far with their financial well being. 

According to CreditCards.com, an estimated 12 million Americans say they have kept a source of money secret from their romantic partners.

It is all coming together now as to why most Americans have such a tough time saving money.

We tend to live paycheck-to-paycheck. We rely on our credit cards to pay for unexpected expenditures which results in exorbitant interest rates. We also are not well educated on personal finance matters and do not use budgeting. 

On top of all that, we tend to avoid financial discussion with our significant other.

There are many benefits to having a frank and open dialogue with your spouse about your financial situation and goals. 

That is why I’m such a big fan of openness and transparency. 

The couple who move in tandem financially, can move the farthest and build the greatest financial wealth. 

Don’t Be Left Out In The Cold At Old Age – Let’s Save For Retirement

Just as I have no intention of relying on the government or the good will of my neighbors to ensure I can put food on the table, there is no way I would rely on the government or other people to help me during my retirement.

Who wants to be 70 years old not knowing when the next warm meal might come from or run the risk of losing shelter?

That is why Americans need to do better on this front.

According to the FINRA Investor Education Foundation, only 58% of Amercians have a retirement account. 

Over 40% of retiree households rely on social security payment for the majority (greater than 50%) of their retirement income. 

Additionally, more than half of Americans will be broke at retirement according to a survey from GoBankingRates.com.

This does not paint a very good picture of the retirement scenario for many of us.

Let’s not depend on anyone but ourselves in order to financially support our retirement.

That is one reason why I followed my 7 secrets in order to save over $1 million in my retirement account in my 30’s. 

We can all do better planning our retirement.

Conclusion

Come on America, we can do better. Against all odds, our founding fathers fought off the better trained, well-disciplined British military with the most powerful navy at the time to win our independence back in the 1700’s.

Let’s work hard once again to win the fight against poor financial health. 

We can do it!

To the audience: Do you think I am being particularly harsh? What other financial rants do you have to complain about? Have you done better than the statistics cited above?

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SoM @ SportofMoney.com

Many people work hard to better their physical and mental health. What about their financial health?

I started this blog back in 2019 to help people better their financial health as well.

My financial journey began with tens of thousands in student loan debt. Over the span of 20 years, I am close to achieving financial independence.

I truly believe anyone can get to strong financial health. Hopefully, this blog can help you on your financial journey to greater wealth and financial independence.

You can read more about me here.

Thank you for visiting. Come again soon!