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Financial Fears that Keep Americans Up at Night


More Americans suffer from financial anxiety than ever before.   In fact, three-fourths of Americans are anxious about their financial future and more than one-third of Americans claimed they were growing increasingly worried about money matters.


What are the financial fears keeping so many Americans up at night?


  • Never being able to retire
  • Not having an emergency savings & living paycheck to paycheck
  • Educational expenses
  • Living in debt forever
  • Healthcare & the cost of health insurance


Americans financial anxiety is understandable.  With pensions almost extinct, many Americans living paycheck to paycheck, educational expenses still on the rise, overwhelming credit card debt and skyrocketing medical costs; it is not surprising that many Americans are losing sleep over these financial issues.


Although the economy is healthy and the job market is in good shape, why are Americans anxious?


In order to gain perspective, let’s look at where the American economy is today versus 1980.


Low or No Retirement Savings

The biggest fear among Americans today is not being able to retire. This a legitimate concern, especially since one-third of Americans do not have money set aside for their future.  There are several contributing factors for low or no retirement savings.


First of all is the lack of pensions.  In 1980, 46% of of employees participated in some sort of pension plan.  Today, only 13% of Americans have pensions, predominantly because many companies do not even offer the opportunity to participate in pensions.  Another issue is the 401(k) which is a poor substitute for pensions.  The 401(k)s are unsafe because they are dependant on the rise and fall of financial markets, which do not compare to the fixed payouts during retirement that pensions provided.  In fact, during the recession, on average Americans lost 25% of their pensions which means they need to gain 33% since then just to break even.  However, most only made 7% back in 2015 with that number growing, but they have yet to break even from their losses during the recession.  With that in mind, 401(k)s are better than no retirement at all, but you have to do your research.  How you invest is different depending on your age.  For instance, in your 20s, you may choose invest 88% in stocks and 12% in bonds, in your 40s, you may choose to invest 75% in stocks and 25% in bonds and in your 50s and older, you may opt for a 50/50 split.  You also may want to search for employers that offer 401(k)s.  Currently, 79% of employers offer these plans, but only one-third of Americans are investing in them.  Many Americans are counting on their Social Security as their source of retirement income which will not be enough since it’s only designed to replace about 40% of the average worker’s pre-retirement income.


Lack of Emergency Savings

Another one of Americans biggest financial concerns is living paycheck to paycheck.  Last year, 69% of Americans had less than $1,000 in savings and 34% had no savings at all.  In the 1980s, many Americans had savings in accounts that had 14% interest, compared to today’s 1.5% offered predominately by online banks.  Most Americans stopped savings as their incomes stopped growing.  They just did not have much left to put into savings especially since many Americans went into debt to buy a home.  With the average family only having $1000 emergency fund, an $500 emergency can be devastating to some families.  Too many Americans have limited to no wiggle room in their budgets, and stand to suffer tremendously should a financial emergency arise.


Rise Educational Expenses

There is more importance of having a college education today than ever before.  Currently, 66% of existing jobs are requiring a college education compared to 36% only requiring a high school diploma.  It is not just the job opportunity that a lack of a college degree can impact, it’s also the pay.  College graduates, on average, earned 56% more than high school grads in 2015 and are expected to make 66% more over the course of the careers.  In fact, college enrollment today has been directly impacted with a whooping 94% enrollment compared to 53% in 1980.  And although it seems critical to have a college education for the best career opportunities, this education comes with a hefty price tag.


In 1980, the average cost of tuition at a four-year college was $2,196 at a public college and $9,882 which has increased to $9,650 for state residents, $24,930 for out of state college tuition, and $33,480 at a private college.  The average annual increase in college tuition from 1980-2014 grew by nearly 260% compared to the nearly 120% increase in all consumer items.

In addition, since 1982 a typical family income increased by 147%, more than inflation but significantly behind the huge increase in college costs.  College costs have been rising roughly at a rate of 7% per year which means as of today the cost of college has risen nearly 500%.  


This overwhelming cost of education has many Americans losing sleep over paying these loans.  Often both parents and students are taking out student loans.  To make matters worse, many parents are still paying their own student loans when taking on additional educational debt for their children to attend college.


High Credit Card Balances

Countless Americans struggle with credit card balances to the point where those debts might seem endless.  Today Americans average $5,689 more in credit card debt than their parents. Since just 1980, that’s an increase of 285%.  Currently, American have $9,600 per household in credit card debt.


There are a few contributing factors to the incredible consumer debt growth.  The first is student loan debt.  Today, many Americans are making hefty student loan payments while living paycheck to paycheck with little to no emergency savings.  Therefore, when they have an unexpected expense or emergency, they often have no means to pay for it so they turn to credit.

Another factor is the popularity of credit cards.  In 1980s, everything changed with credit cards becoming more accessible.  There used to be a time when only rich people could get them. Now, the robust credit score industry has made banks and finance companies more comfortable giving credit cards to a much broader population of Americans.  Credit cards became readily available to the middle- and lower-class Americans who run up credit card debt with higher balances that they can’t pay off as easily as the upper-class cardholders who used to make up most of the market.


The Upward Climb of Healthcare and Health Insurance

The Healthcare cost has climbed so high that today that Americans pay $3.4 trillion per year and many are not receiving the best care available.  The average cost of healthcare per person in 2016 was $10,345 and it was only $1,108 in 1980.  Depending on where you lived in 1980, the average price for a typical delivery was $1,000 – $2,000.  This included a 3-4 night stay all physician costs, room for mom and baby’s nursery stay.  Today, the average cost is $8,775 for a typical delivery and most moms and their newborns only stay 24 to 48 hours after delivery.  This number has varied tremendously based on where you live.  The least expensive was a city near San Diego $3,243 for and in Sacramento CA was $15,420!  The Healthcare cost has increased 528% since 1980 and it’s showing no signs of slowing down.  Even with many Americans having insurance, they often neglect care due to high deductibles that must be met before their insurance picks up the bill.


The increase cost of housing, college and healthcare combined wages not keeping pace with inflation has caused American families to struggle.  They are consumed with credit card debt, have little to no retirement and emergency savings that will most likely not cover any real emergency.  It’s no wonder that they are losing sleep.


However, there is hope.  Many Americans have turned to a second job and started to set aside money towards credit card debt, an emergency fund and even retirement.  Start small!  Every little bit can help especially if you stopped spending with credit.  If you have a budget, stick to it,  and start paying credit down, you will be able to start saving and be on your way to being debt free.  It may take a lot of time, but it you are diligent, you can achieve it.

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