Finance Statistics for Thought

As an engineer I like data and like to deal with facts, numbers and figures. This post is about facts that will hopefully get your attention and illustrate why financial education (along with applying that knowledge) is critical for financial strength and security. As you read some of the statistics below think about if they might apply to you or someone you know; chances are at least a few will. I know I was the person in several of the examples listed below. Let’s take a look at some financial statistics for the general US population:

Half of Americans are concerned, anxious or fearful about their financial future
Only 24% of millennials demonstrate basic financial literacy
Over 50% of American households live paycheck to paycheck; of that number 1 in 5 earn $100k+ annually
65% of households don’t have a budget
19% of households have no emergency fund at all, another 31% have less than $500 in emergency money
More than 60% of households would not be able to come up with $1,000 in case of emergency
Americans hold over $999 billion in credit card debt
- 60% of adults carry credit card balances month to month
- Average person that carries a balance owes $7,500
- National average APR (interest rate) for credit cards is 18.5%
Non-revolving debt (loans) total over $2.8 trillion
Total outstanding auto loan debt totals $1.17 trillion
- Average household with an auto loan owes $28,000
- The average monthly car payment is $500
55% of people don’t know their credit score is the most important factor when applying for mortgages, loans & new credit cards
30% of Americans have nothing at all saved for long-term goals such as retirement
Adults in the US with net worth of $1 million: 1.2% (~3 million people)
- High-schoolers who expect to be millionaires by age 40: 39%

Now let’s look at some financial statistics that apply just to military personnel:

73% of military members feel they would benefit from additional financial advice/education (hence this purpose of this site)
55% of military members do not feel prepared financially for an emergency
6 out of 10 service members carry credit card balances month to month
32% of enlisted personnel used at least one method of non-bank borrowing in the past five years (payday loans, pawn shops, tax refund advances, or other non-traditional loans)

military finance, financial statistics, | MilitaryDollarsandSense.com — How I came up with the statistics in this post?

Don’t worry, I did not use the Dilbert method to generate statistics. In fact you can see where the stats came from under my sources at the end of this post. Now some of the above figures are rather alarming, so I would like to take a minute to discuss them. Half of us are concerned about our financial future; this is understandable especially given the other stats listed. In my case I went from not caring about my financial future much at all, to being very concerned, and now at present to being mostly at ease. These days I am not necessarily concerned or worried about our future, but rather I pay attention to it and give it consideration often. The reason I am not overly concerned is I am confident that by continuing to implement our plan and adapting it as needed everything will be OK, and the past few years back up that statement.

I was not really surprised that half of Americans live paycheck to paycheck; what was surprising is that 1 in 5 of them earn more than $100k per year! In my opinion this stems from a lack of financial education, discipline, or perhaps both. That was the case for me in my earlier years; it was a combination of little financial knowledge and next to no discipline. I believe living paycheck to paycheck on a reasonable salary can be a result of not having a budget. In many cases developing a good budget is the first step to financial security. The steps to financial security are covered in this post, while budgets are covered in this post.

The amount of people without an adequate emergency fund is alarming. It is nearly impossible to predict when you might need extra money all of the sudden, and turning to credit cards is not the best way to cover emergency expenses. That may partly account for the crazy credit card stats. Two out of three adults carry a balance month to month and they owe an average of $7,500 on that balance. Yikes! At the average APR of 18.5% those folks are paying $1,400 per year in interest alone. Credit card debt can spiral out of control pretty fast, but credit cards can also be a very useful (and sometimes rewarding) tool when used properly. We will go over credit cards in much more detail in future posts.

The auto loan debt is not very comforting, but honestly not very surprising either. I pay attention to cars, and I have seen the prices of vehicles rise drastically the past decade or so. In particular trucks and SUVs are hot sellers now, and the prices of them keep climbing (see this truck article as evidence). I had a nicely equipped 2011 GMC Sierra that I used to own; that same truck today with the same options costs 23% more (much more than just inflation). Americans in general have a desire for new and expensive cars, and the auto manufacturers and banks have been happy to satisfy that desire. Just think about all the new cars and trucks you see around you; it might appear that everyone else is very well off compared to you. However, the $1.2 trillion in auto loans would indicate most folks do not own those fancy new cars; instead the banks own them. One statistic I did not put in the list is that auto loan defaults have been slowly and steadily rising the past few years , so people are having a tougher time paying for these very expensive cars.

Moving on to credit half of Americans don’t know much about credit scores and how it affects them. I will thoroughly go over credit scores in another post, but your credit score is one of the most important factors when you apply for a loan. Poor credit along with financial trouble can also cause you to lose a security clearance. I threw in the statistic about high-school people expecting to be millionaires just as a reality check: too often the ambitions of younger folks exceed reality (I was guilty of this also).

The fact that 73% of service members think more financial education would help supports why I started this site. Following the procedures and ideas on this site can make you feel prepared for financial emergencies and help you eliminate credit card balances completely. Not-traditional loans, such as payday or car title loans, are to be avoided completely. They are not trying to help you out, just make money off you.

The take-away from the statistics is that financial knowledge is essential for sustainment and happiness. Money problems can cause a lot of unnecessary stress, and if uncorrected can lead to larger problems such as repossession, debt collectors, cancelled security clearance, and possible job loss. The good news is that with education and discipline all of these problems can be overcome.

To end on a lighter note I will throw in a comic from Terminal Lance (funny site but not always family friendly reading).