How you present yourself financially to the world, how your peers perceive you, and how you feel about your financial situation may be three totally different stories. “The Secret Financial Lives of Americans,” a report from nonfiction.co reveals surprising insights into the double and triple financial lives that many people lead.
Below are 14 striking realizations about the health of people’s income, savings, and spending and how it may differ from what they project into the world.
1. Money Makes People Cry
While the likelihood that you’ve cried over not having enough money goes up the less you earn, more than half of all Americans have cried about not being able to make ends meet – 52% of survey respondents have cried over not having enough money.
Emotions and money are deeply intertwined aspects of human experience, capable of evoking intense feelings ranging from joy to anxiety.
Last month my Dad and I spoke about his financial situation. The discussion, not even the facts of his financial life, triggered deeply felt emotions in us both bordering on despair. He should be fine financially, but the deep worries about the quest to be financially stable and the desire to get reassurances about the numbers were deeply emotional.
Building a financial plan with the NewRetirement Planner can help build financial confidence and reduce tears and doubt about money. However, it is not unusual for people of all financial backgrounds to want a second opinion on their situation.
If you want additional assistance, NewRetirement also provides coaching and consultations with a CFP® professional:
- Coaching: Meet 1:1 with a financial coach to go over your NewRetirement Plan. Get reassurances that your data is entered correctly and learn how to use the tool to answer your own financial questions. Learn more…
- Consultation with a CFP®: Collaborate with a CERTIFIED FINANCIAL PLANNER™ professional from NewRetirement Advisors to identify and achieve your goals. Book a FREE Discovery session…
2. Almost 40% of Americans Have Gone to Sleep Hungry
I remember my grandpa talking about going hungry during the depression and how he would add catsup to hot water as a meal. Well, going hungry isn’t a thing of the past. It is happening right here and right now and at home in the U.S.A. In fact, 37% of Americans admitted to going to sleep hungry because they couldn’t afford to eat at some point in their lives.
This is a much higher percentage and arguably more alarming than the high numbers of people who skip filling prescriptions and taking drugs due to the high costs.
3. Financial Struggles Are Obscured by Public Personas
How do you flaunt your wealth? Almost everyone does it. Do you post photos of your vacation online? Carry a status bag? Drive a fancy car? Have the latest technology?
The nonfiction.co research found that while the majority of people like to share information on splurges either on social media or just in every day life, very few are willing to discuss how much they make, how much debt they carry, their net worth, or how much they save for retirement.
It appears that Americans like to show off wealth, but they don’t want to discuss the reality of their financial situations – good or bad.
This double life can be difficult to bear and can be a major cause of stress. It may be useful to think more about why you want to present yourself in a certain way when the reality is different.
4. Forty Percent of Americans Overspend to Impress Others
According to Lending Tree, almost 40% of Americans have overspent to impress someone else, especially on clothes, shoes or accessories. Feeling the need to overspend can be frustrating, which is especially true when the stakes are high. In fact, more than a quarter of those who overspent to impress others are currently struggling to get out of debt because of those purchases.
If you struggle with overspending, you might want to explore:
5. Families Keep Financial Secrets from Each Other
NerdWallet’s annual consumer credit card report found that many Americans are keeping financial secrets from their loved ones. The data shows that:
More than 2 in 5 partnered Americans (43%) say they have withheld financial information or lied about it to their significant other. And nearly half of Americans overall (49%) believe it is OK to have savings that your significant other doesn’t know about, according to the survey.
The good news? Families are doing a better job of communicating about money with their adult children.
If you are keeping secrets, here are a few things to consider:
- You and your spouse need to be in the same ballpark when it comes to long term financial plans. Using the NewRetirement Planner to discuss the details of your financial future is a good starting place.
- This may be controversial, but you don’t always have to agree on how every dollar is spent. Establish guidelines for monthly spending that you can both agree to. So long as you are on track with short and long term spending goals, some haziness around exactly how you spend money may be okay.
- Inter-generational wealth can be a powerful way for everyone to do better. Explore how discussing money values and the reality of your financial situation can benefit your whole family, including you:
6. Self Made is a Myth for Many
Very few of people achieve success on their own. And, family is often a source of significant support. A full 63% of Americans have borrowed money from family.
Let me tell you my story. I live in a lovely home in a great school district. Most people who don’t know me must assume something about my finances. However, Due to high costs, buying into this area would have been impossible on our own. My brother in law helped us with both the down (and ongoing mortgage) payments. It was a big investment in our and our children’s quality of life and we are very grateful to him. Luckily, it has also been a good financial investment for him as our home’s values has increased significantly.
I share this pretty openly with neighbors and more often than not I learn that they have had help too. It is a fairly common – but not openly known – scenario.
A few lessons from the stats around money and family:
- Talk about money with friends and family. It is important to normalize real world money issues and to get away from trying to keep up appearances.
- Relying on family to bolster finances can be a controversial, but understanding generational wealth and the impact that you can have on your family may be an important consideration when setting financial goals. Use the NewRetirement Planner to understand your potential estate and how much gifting you can do while you are alive.
7. More People Have Credit Cards than Have Retirement Accounts
Research cited in Louis Hyman’s book, Borrow: The American Way of Debt, finds that only 47% of Americans have a retirement savings account while 76% have a credit card.
This is a problem. A credit card is not a necessary component of a healthy financial profile. However, unless you want and are able to work until you die or can live on Social Security alone, retirement savings are mandatory.
8. Sixty One Percent of Americans Carry Credit Card Debt
After a brief dip during the pandemic, credit card debt is rising to record rates.
Recent research finds that 61% of Americans are in credit card debt, owing an average of $5,875. In addition, 23% say they go deeper into credit card debt every month and 14% say they missed a payment in 2023.
For anyone who wants to minimize credit card debt, building a financial plan and comparing your plan with debt pay off and without is a powerful start to taking control. Use the NewRetirement Planner to compare debt pay off scenarios.
9. Almost Fifty Percent of Americans Rely on Credit for Essential Living Expenses
Paying for your groceries with a credit card and paying it off each month is great.
However, using debt to make ends meet each month is far from ideal. And yet, 48% of Americans rely on credit to cover essential living expenses. This practice makes it very hard if not impossible to build wealth and financial security. Keeping expenses below income is a foundation of financial wellness.
10. Not Everyone Who Looks Successful Has Retirement Savings
As I suggested above, I live in a fairly affluent community. Everyone lives in nice houses and drives new cars – Rivians, Range Rovers, and Teslas. However, if you get people talking, you’ll learn that an alarming number of households don’t have much in the way of retirement savings or a clue about how to get to a secure retirement.
And, the data bears this out. Polling suggests that more than 50% of households feel that they are behind schedule for retirement savings.
The good news? No matter your age, it is not too late to save. Incomes typically grow as you get older, giving you more money that could be squirreled away into savings.
11. People Want Someone to Talk to About Money
The nonfiction.co research found that Americans are desperate to talk to someone about their money – but not necessarily a financial advisor. They want the equivalent of a primary care physician (preferably the old fashioned kind that knew your family and made house calls) or personal trainer: someone who knows your dirty secrets, performs regular checkups, advises on preventive care, identifies potential issues, sets a course, and ensures that you have the right specialists working for you.
The NewRetirement Planner is designed to give you this conversation virtually. There is no one looking over your shoulder to judge your choices and financial explorations. The virtual coach will give you suggestions. And, scenario comparisons can help you answer questions about everything from when to retire to how much you can comfortably spend on vacation this year.
And, if you want professional guidance, working with a fee-only CERTIFIED FINANCIAL PLANNER™ professional is closer to a family physician than other types of advisors. The focus of NewRetirement Advisors is on helping you with your holistic financial plan and getting your real world questions answered.
Collaborate with a CERTIFIED FINANCIAL PLANNER™ professional from NewRetirement Advisors to identify and achieve your goals. Book a free discovery session.
12. Too Many Americans Lack a Safety Net
According to the Fed’s Economic Well-Being of U.S. Households survey, a whopping 37% of Americans lack enough money to cover a $400 emergency expense.
So, nearly two out of every five people need to use credit, turn to family, sell assets, or get a loan in order to cover any major unexpected cost.
That’s why any financial plan needs to start with emergency savings. Emergency savings are the very foundation of financial wellness. Depending on your age, you should have between 3 months to 3 years of mandatory expenses available in cash to cover your lifestyle.
13. Early Withdrawals from Retirement Savings Are at a Record High
Experts are very concerned after seeing increasing numbers of people take hardship withdrawals from their retirement savings. The number of people tapping their 401k early with hardship withdrawals increased 36% in 2023. And, additional research shows that the percentage of people with loans against their retirement savings has grown to nearly 20%.
Hardship withdrawals: A hardship withdrawal from retirement savings is a distribution taken from a qualified retirement account, such as a 401(k) or IRA, to address immediate and significant financial needs during times of hardship. Examples of qualifying hardships may include medical expenses, preventing eviction or foreclosure, funeral costs, or educational expenses. Unlike a loan, a hardship withdrawal is not required to be repaid but is subject to income tax. Additionally, if you’re under 59½ years old, you may face early withdrawal penalties of 10% on top of the income tax unless an exception applies.
- It is almost never a great financial strateagy to take a hardship withdrawal.
Loans from retirement savings: A loan from retirement savings allows individuals to borrow a portion of their vested balance from qualified retirement accounts like 401(k)s or IRAs, provided the plan allows loans. Typically, borrowers can access up to a certain percentage of their vested balance, with a maximum limit set by the plan. The loan comes with terms and conditions, including an interest rate and repayment period usually ranging from 1 to 5 years. Repayment is made through payroll deductions or other agreed-upon methods, covering both principal and interest. However, failing to repay the loan according to the plan’s terms can result in it being treated as a taxable distribution, potentially subjecting the borrower to income tax and early withdrawal penalties if they’re under 59½ years old.
If you are facing the need to withdraw from your retirement savings before retirement, be sure to compare this scenario with other options for accessing cash like through a home equity loan and assess your overall priorities for short term spending.
- A loan from you retirement savings can be a good tactic of you need cash. Research suggests that 90% of plan loans are successfully repaid.
14. Very Few People Have a Written Financial Plan
According to a variety of sources, only 23-33% of Americans have a written financial plan. Research from Schroeders Asset Management found that only 23% of people have a written plan. Their research also indicates that while 40% percent have done some planning or thinking about their money, 37% have done zero planning.
Good news on this front! It is easy to get a plan. The NewRetirement Planner puts your financial wellness at your fingertips. Organize your financial information, assess your strengths and weaknesses, make better decisions about your money and discover ways to increase your wealth and security, and stay on track to the future you want.
