Updated: Jan 1, 2019
In this constant information age we live in, 2018 has shown to have plenty to digest that might provide us some clarity for the coming financial year. I want to go through a few of the more significant pieces of information that has perked my ears when it comes to our personal finances and try to offer some perspective on how to best achieve our financial well-being in the new year. Here are the statistics that were presented in 2018 that kind of stopped me in my tracks:
44 % couldn’t cover a $400 out-of-pocket emergency expense
I will have to be honest, this one has stuck in my head ever since I first heard it. In the age of Dave Ramsey and Suzie Orman preaching about the need of a good emergency fund, Americans still haven’t heeded the simple advice of boosting one’s savings rate. We have also seen that Americans average savings rates have been right around 6% which, though low, is much better than the 1.9% that bottomed in about 2005. One of the keys to a good financial life is to live within one's means and build up a healthy emergency savings account. One of the nice psychological approaches we can take is to build up to a number that feels comfortable to us; could be three months of income or expenses. Once achieved, we can then start looking at the bright side of savings. You’ve built your emergency fund now how about building your “Opportunity Fund”. With interest rates at banks still low, you can afford to take some of that newfound savings skills to the market and find conservative rates of return in a brokerage account. Who says saving doesn’t have to be fun?
Just 54% of Americans invest in the market, either through individual stocks, mutual funds, pensions or retirement plans like a 401(k), according to Gallup. That's down 11% since the Great Recession.
One of the greatest changes to the landscape of retirement planning has been the shift from traditional pension plans to what are called defined contribution plans or more commonly referred to as 401(k) plans. Basically, we have gone from a method of retirement savings that once placed this responsibility on the government and the employer and now we are much in the boat of having to navigate this all on our own. One thing we know is that there is great fear in markets because of their short-term unpredictability but one needs to hold to the long-term outlook in the stock markets. For the long haul the stock markets have outperformed just about any other major asset class whether it be real estate, bonds, precious metals or sitting your money in cash. Volatility makes people fearful but now is the time to start even if it means starting small. Find a trusted adviser to help you get started today.
A GOBankingRates report finds 13.7 percent of Americans have $0 saved for retirement. 28.6% have less than $10,000. 29% of households 55 and over have no retirement savings or pension.
This is another scary one. The cataclysmic shift in thought on money and retirement has taken place and I believe it to be right around the millennial and GenX generations that are making this change. No more can Social Security provide the viability of future generations and that shift has contributed to about 8 out of 10 Millennial's opening retirement accounts. These statistics, though bad, do provide some upside potential if one can face them head on, get some good advice and create an action plan. Compounding, a good budget, and discipline is your friend and can be the difference between retirement in the red and retirement in the black.
Only 30% of Americans have a long-term financial plan that includes savings and investment goals
This one is where I would end the year in a look forward as to what we can do to battle against becoming a statistic. If you are in this 30% of Americans then you are, as Charlie Sheen once famously stated, “Winning!” If you aren’t in this prestigious class, then you certainly can be. Someone smart once said the ‘The journey of a thousand miles begins with one step and today can be the day you begin that journey. Taking ownership on our success also means taking ownership on our failures. A good financial adviser will sign on with you for those failures along with those successes. Take some time to investigate getting your own financial plan started and if you don’t know where to start feel free to contact us for help in providing some needed direction.