Financial Planning Month
October is National Financial Planning Month, an annual designation observed to raise awareness of the importance of financial planning.
Since the spotlight is shining on this subject, let’s take a deeper look at some of the issues that Americans face when it comes to their finances. For many Americans, the reality of the situation is they are in debt, and that means their financial future is potentially on thin ice.
By the end of 2018, America owed a total of $870 billion in credit card debt alone — a 5% increase from 2017. Factoring in other sources of revolving consumer credit, Americans owe a total of $1.057 trillion as of March of 2019. The outstanding revolving consumer credit debt is increasing at a staggering rate and has surpassed amounts owed during the 2008 Great Recession. At the very least this should be concerning, but these statistics are staggering when you think that some of the debt could have been avoidable or at least lessened by smart financial planning.
The sad truth is that it seems many American families are not taking control of the situation, and this could leave them in trouble later on in life. According to a recent study by U.S. Bank, 41% of Americans say they use a budget – up from a Gallup poll in 2013 that put the percentage at 32% – or one in three households. That means a large majority of people are not keeping track of their finances in any organized fashion.
A budget is the foundation for setting up adequate financial planning. If you have no budget, there's no way of making sure that the essentials get paid for, and there's no sense of financial certainty – it's just "spend and hope for the best."
If you don't know how much you need every month and every year, how can you plan for it in the future?
The typical American household has an average of $8,863 in savings at a bank or credit union, according to a recent report from Bankrate that analyzed inflation-adjusted data from the Federal Reserve. That’s purely in liquid savings, so it doesn’t include retirement funds or other investments. Unfortunately, that paints a somewhat skewed picture, because it’s an average across all age groups and social strata.
Not surprisingly, younger Americans have saved a lot less than the older generation, but the average for under 35s is less than $5,000. And 29% of households have less than $1,000 in savings. That barely gets you through a month or two, depending on your expenses. And if things come crashing down in an emergency or an accident or illness ther is no cushion.
Saving nothing for the future could mean the difference between feeling safe and secure in later life or being consistently worried about what will be next.
Financial planning and budgeting correctly is the best way to ensure financial stability and longevity.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.