Four Scary Financial Facts About You (or Someone You Love)

By Lynnette Khalfani-Cox, The Money Coach®     

Does the state of your finances keep you up some nights? You’re not alone. Many Americans have trouble managing their money. Let’s look at four of the scariest financial facts regarding many Americans—and how to make some positive changes if you need to.

Scary Financial Fact #1 – 75% of Americans don’t have an emergency fund

According to a poll conducted by The Associated Press-NORC Center for Public Affairs Research, only three-fourths of Americans making less that $50,000 a year and two-thirds of those earning between $50,000 to $100,000 would have significant difficulty coming up with $1,000 to cover unexpected bills. This is a frightening statistic, considering that many of those Americans are just one or two paychecks away from experiencing a financial nightmare.

The solution: Start slowly building your emergency fund so you can feel more at ease when trouble comes knocking at your door.

Scary Financial Fact #2 – 35% of adults who use credit have debt in collections

Debt can be a monster that follows you anywhere you go, whether you’re trying get a competitive interest rate on your mortgage or auto loan, or you’re working to achieve some future financial goal. According to a report on delinquent debt from the Urban Institute, nearly 35% of Americans with a credit file, roughly one in three adults in this country, have an outstanding debt that has gone to a collection agency. And according to the report, this debt load has been growing in recent years; delinquent borrowers owe more than $5,000 on average.

 The solution: If you want to keep those debt monsters at bay, work out payment plans with your creditors so your obligations don’t wind up becoming severely delinquent.

Scary Financial Fact #3: One third of Americans only make minimum credit card payments

Speaking of debt, according to FINRA’s National Financial Capability study, a hefty one third of Americans just pay the minimum due on their credit cards each month. Considering that Americans collectively hold roughly $1 trillion in credit card debt, this number doesn’t look like it’ll get reduced anytime soon. But making minimum payments means you’ll ultimately end up paying more in interest with zombie debt that grows and grows. More credit card debt also translates into a reduced credit score.

The solution: Send excessive credit card debt to an early grave by doubling or even tripling the minimum payment, when possible. If this is simply not feasible, just pay something extra; whatever you can afford. Do it consistently each month and you’ll pay it off much faster.

Scary Financial Fact #4- Identity theft affects tens of millions of people annually

This year alone, an estimated 60 million Americans have been affected by real-life financial predators: identity thieves. According to a 2018 survey via a Harris Poll, one in five adults in the United States have had their personal information used for evil purposes! And this number is rising, with the average loss per incident equaling a scary $1,000 in 2017.

The solution: To keep identity thieves and other tricksters out of your financial life, be extra cautious about safeguarding your financial records and sensitive data. Also, don’t disclose your Social Security number unnecessarily just because someone asks. Finally, if you get a written notice of a data breach from any company with whom you do business, do take advantage of any credit monitoring or identity-theft protection service they offer.

 

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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or BALANCE counselor who can help tailor a solution for you.

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