More than one in five Americans—or 21%—are not saving any of their annual income, according to a survey from Bankrate.com of 1,000 working American adults. A separate study, meanwhile, shows that only 29%—or 73 million of Americans—say they are financially “strong,” indicating they are spending, saving, borrowing, and planning well financially, according to a 2019 study from the Financial Health Network. More than half—or 54%—instead say they’re “coping,” struggling in some but not all aspects of their finances.
Older households (those aged 55 and higher) were found to be more likely than other age groups to save more than 10% of their annual income, the Bankrate study found. On the other hand, millennials and Generation Xers are more likely to say they’re not saving at least 10% of their income or any money at all.
“There is no cookie-cutter method” to financial wellness, Douglas Boneparth, president and founder of Bone Fide Wealth, told CNBC.
Setting financial goals is key to gaining control, experts say. They encourage consumers to lump financial goals into two main categories: short-term and long-term.
The short-term goals are the immediate expenses that are needed to be covered over a few months or few years, whereas long-term goals are those that can take several years or even decades to achieve.
Short-term goals could include managing rent, building an emergency fund, and paying down credit card debt, CNBC reports. Most financial experts advise consumers should not spend more than 30% of their income on rent, including utilities, or they’ll be considered “cost burdened.” Further, studies from CNBC and Morning Consult find that nearly 55% of Americans who own a credit card have credit card debt, carrying a balance of $4,293 on average.
Another potential budget killer: funding a home improvement. “Home improvements can wreak havoc on your budget and often come with hidden costs,” CNBC reports. “Although more often than not these improvements increase your home’s value, it’s important to not get in over your head. Separate the needs and wants.”
Financial analysts advise that consumers factor in a savings plan for reaching long-term goals. paying off student loans, building retirement savings, and paying off a mortgage.
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