Why Your Financial Situation is More Common Than You Think

There’s no shame in struggling to make ends meet. The truth is most Americans struggle financially. We need to end this stigma, and instead focus on what we can do to improve our personal finances.

Almost everyone in America is striving for something. It’s the American dream. Right? 

We’re all chasing a better job, a better home, or even a better car. We’re all comparing ourselves to our neighbors, the Joneses. 

The Joneses family goes by many names, but you’re familiar with them. They’re the neighbors across the street with the luxury SUV. They’re the social media mutual with a picture-perfect home. Their lives seem flawless.  

That’s the thing about present-day society. It makes us pursue to conform. It’s the reason we keep up on the latest trends, watch the same shows as our friends, and buy products recommended on Instagram

The truth though, is that it’s all a big fat lie. 

The Joneses white-picket fence “perfect” family rarely exists. The 50’s-style portrait of an American family just isn’t accurate anymore. 

Here’s what we know for sure: most Americans struggle financially. They may struggle to cover bills, pay off debt, or even build a savings. 

It’s not just an effect of the 2020 pandemic. This financial state of American families has been ongoing for decades. 

Let’s take a look at the current state of finances in America. 

Throw out your old-fashioned ideas of finance

For starters, both women and men are now in the work force. Many families find that they need more than one parent providing for a multi-person family. 

Speaking of parents, it’s not always a nuclear construction of family. Today, some families consist of just one parent. Other families have several parents raising and supporting kids as couples have divorced and remarried. 

Don’t forget about the rising costs. In the 1950’s, you could buy a house for $7,400. But what about inflation? You’re right – at that time, families were making an average of 2,990 a year. At that rate, the house was about 2.5 times the amount a family made in a year. Today, the average home costs $221,800 and the average family makes $49,445. A home now costs about 4.5 times the amount a family makes in a year. 

Mortgages are higher, and so are other forms of debt. Consider student debt. Over the course of 50 years, the cost of a 4-year college has jumped over 3000%! That means more student debt. 

Honestly, a lot of these things existed in the 50’s. No one talked about them. As time has gone on, more families have become vocal about their situation. We want to clarify there’s no shame in these family, work, and home dynamics. All of these are completely common. 

Millions of bank accounts are empty

Three in four Americans are living paycheck-to-paycheck.  

You’ve probably heard of the term “living paycheck-to-paycheck”. But what does it mean? A family that lives paycheck-to-paycheck only makes enough money to cover their average bills before the next payday. 

An unexpected expense, or a change in work, can throw off all of their finances. Impacts like that might be noticeable for months at a time, until they’re able to catch back up. That is, if they are able to catch back up. 

Families living paycheck-to-paycheck aren’t just marginalized or underemployed. About 10% of people making $100,000 or more a year, also live paycheck-to-paycheck. It just depends on what a person’s costs are, and how it compares to their income. 

Families that live paycheck-to-paycheck don’t have much of a savings account. Four in 10 Americans would struggle to cover a $400 expense. That might be a trip to the doctor, new brake pads, or missing a day of work. Even more than that, seven in 10 Americans wouldn’t be able to cover a $1,000 expense. That looks like a new oven, the cost of new tires, or even a trip to the ER.

Afterall, saving money is hard.

Your neighbors, the Joneses, they’re broke. They’re just one emergency away from a financial disaster. 

How to put more money in your bank account 

If you missed a recent payment, you could always try calling the company and asking for assistance with covering a bill. This strategy only works once or twice for accounts with good payment history. We’ve all missed a payment before. Most companies want to get paid. So, many have created programs to help customers that are struggling a little. 

Consider a side gig for extra cash. The pandemic brought change. Consumers want more convenience. Consider a gig like Uber Eats or Lyft. Don’t want to leave your house? That’s okay too. Thanks to growing technology, there are many online side gig options today. Businesses and creators need help. Check out sites like Fiverr to see what services you can provide. You might be able to find work creating designs, teaching music lessons, or even transcribing videos. 

Sit down with Excel and plan a budget. Look at your monthly income and expenses. List them out, so you have a good picture of where your money is going each month. Determine where and how you can cut expenses to save money. Once you’re able to save money, it’s important to use it to build a small cushion for yourself. Many experts recommend saving an emergency fund of at least $400. It’s a great way to make sure you have the cash necessary to cover emergency expenses. 

Almost every family has a debt problem

How many Americans do you think owe debt?

How much debt do you think the average American has? 

I’ll let you take a second to guess.

Would you have guessed that 80% of Americans owe debt? Would you have guessed that the average American has $29,800 in debt (not including mortgage)?

If you think that sounds like a lot, you’re right. In America, about 67% of families own a pet. More Americans owe debt than own pets! Debt might feel uncomfortable, but it is completely normal. 

If you owe debt, you’re a part of the majority. 

Welcome to the club. You, your friends, and your neighbors are all a member.

Sometimes debt can feel isolating. 

Afterall, who feels comfortable talking about finances?

 The thing to keep in mind though is that debt is common. It’s a burden many of us face. Know that you’re not going through this battle alone. 

Whether it’s credit card debt, a car loan, or even student loans, almost every family has debt. It’s not just traditional loans either. Consider debt-like fees such as bank overdraft fees. In one year alone, there might be as much as $11 billion in overdraft fees. 

How to get out of debt

Earlier I suggested budgeting and saving up an emergency fund. With budgeting, you want to cut expenses so that you simultaneously have cash going towards your debt and your savings. Having a cushion is a great place to start because it helps prevent you from having to take out debt going forward. 

Start by paying off your debt with the highest APR first. Those high interest rates can cost you a lot of money. The faster you pay those off, the less money you’ll have to pay. 

If you have a lot of debt, see if you can consolidate the loans. Consolidating debt does two things for you. It provides you with a smaller interest rate. In addition, it merges your debt into one account so that you can make one monthly payment towards it. A lot of people find this route easier than having to keep track of several monthly payments. 

The average credit score is pretty low

We’ll cut to the chase here. In 2019, 34% of consumers had a credit score at or under 669. 

FYI, a “good” credit score starts at 670. 

The better a person’s credit score, the better loan offers they have access to. For example, a person with “exceptional” credit might be able to get a credit card with lots of perks. They might qualify for 6% cash back, or a bunch of airline miles. It’s the same with a mortgage or auto loan. A person with a better credit score might be able to get a lower APR, thus saving them money in the long run. 

Almost a third of Americans don’t have access to helpful forms of credit. Some don’t have access to lines of credit outside of payday loans. Not familiar with these types of loans? Learn more here

Credit scores were created to give a snapshot of how good individuals are at paying back credit. A person might have a low credit score if they’ve missed payments, have a high credit card balance, or just don’t have enough loans… Yep, you read that right. Not having a large history with debt, is one way to have a low credit score. 

Unfortunately, credit checks are required for loan and housing applications. It’s important to remember that a credit score is not a reflection of how good you are with money. And it’s definitely not a reflection of you as a person. 

The average person has debt, struggles financially, and sometimes turns to personal loans when in need. There’s no shame in any of it.

How to improve your credit score

At this point, you already know that on-time payments is a great way to boost your credit. Today, we’ll look at some options that aren’t often covered. 

Instead of waiting for your monthly bill to arrive, consider making weekly payments on your credit card. That helps keep your credit utilization low. It’s a great way to improve your score by a few points. 

Are you good about paying your other monthly bills on time? Sign up for the Experian Boost. They’ll look at your payment history on utilities, cell phone bills, and other monthly services. If you have solid payment history, your score might jump about 10 points instantly. 

Check your credit report to ensure you don’t have incorrect information on your credit history. Identity theft is more common than we’d like to think. So are typos. You never know when someone else’s account ends up on your report. Check your credit report routinely to ensure the information is accurate. If there’s something on there that shouldn’t be, you can contact the credit agency to help get it removed from your report. That’s a quick way to boost your credit score by a lot.

Making comparisons just means you’re human. The good news is that you can improve

As humans, we’re capable of self-reflection. One piece of self-reflection is evaluating ourselves. The easiest way to do that, is through comparison. That normally takes the form of comparing ourselves to others.

Life changes every day, and with it, our opinions change. We compare our promotions, belongings, pay, and more with others. 

Like most things, competition is good in moderation. It can act as a driving force for self-improvement. Too much though, and it can hurt us. 

No matter your current financial situation, you’re not alone. There’s no shame in not being able to cover a bill or two.  

That doesn’t mean it doesn’t suck. The good news is that there are things you can do to improve your situation. How you respond to these situations is up to you. You have the chance to make something new and build up your financial health. 

Have helpful tips? Be sure to leave a comment below. 

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