10 Breathtaking facts that can cripple your finances

This post is going to be a SHOCKER (even for those who are well-versed with the latest “money facts”).

Hopefully, you don’t see yourself in too many of these scenarios. 

THREATENING MONEY FACTS are like mines in a minefield. If you stumble onto one, you (and your bank balance) may suffer for a lifetime.

Protect yourself from making these mistakes. 

Written by Joel and Leah DePeri
THIS POST MAY CONTAIN AFFILIATE LINKS. AS AN AMAZON ASSOCIATE I EARN FROM QUALIFYING PURCHASES. PLEASE READ OUR DISCLOSURE FOR MORE INFORMATION.

We’ve been there.

We understand how difficult it is to live paycheck to paycheck.

We know how it feels to SCRAMBLE to pay bills. We’ve watched our checkbook balance WHITTLED DOWN TO ZERO at the end of the month. Many times we overspent, racking up more debt than either of us was comfortable with. It seemed nearly impossible to get ahead financially at times.

We had no idea where our hard-earned money was going. It literally seemed to disappear each pay period.

We traveled that SEEMINGLY NEVER ENDING ROAD for a number of years before we discovered a better way…

  We learned to TRACK OUR MONEY and TEACH IT WHERE TO GO.

Our circumstances changed once we held ourselves accountable to a budget that we created ourselves.

It took a lot of effort sometimes. We had to say “no” to many things. (Please don’t misunderstand. We don’t live a life of austerity. We budget some money each month for the “fun stuff” too). 

You can do this too. It’s not too hard.

You just have to DECIDE that you will not accept living in debt anymore.

Living paycheck to paycheck doesn’t have to be a permanent part of your future once you MAKE THE DECISION to be the “boss” of your money. 

The Turning Point…

The turning point for us was when we made a decision to keep track of every expense we had for thirty days. We made a note of each time we spent money (even if it was a dollar or two). At the end of the month, we made a list of categories and totaled our expenses. 

There will be some surprises when you do this exercise for a month. It can be very revealing. (We were amazed that we spent over $700 for food for three people. You may discover that you spent $900 going out to eat or $300 buying lunch each month).

This simple exercise should give you a good idea of you spend your money each month.  

The next step is to create what is called a “zero-based” budget. You need to list your income for the month ahead. You also need to list the expenses that you anticipate. 

At the end of the month, your income and expenses MUST match. That’s why they call this a “zero-based” budget. 

The beauty of a budget like this is that you never spend more than you earn.

A budget doesn’t have to only have categories for necessities like mortgage and food. You can also list some fun categories. On our budget, we have a category for Entertainment and we each have some “fun money” where we can buy whatever we want for ourselves. 

Two examples… 

1)   During the course of a month, you discover that you have spent $50 more on clothing than you anticipated (remember that you have to make your budget balance). You have two choices. You can either earn an extra $50 or you can subtract $50 from one category and add it to the amount you have budgeted for clothing. Of course, there is a third choice. You can simply change your mind and decide that you really don’t need this piece of clothing and bring it back for a refund. This will ensure that your budget balances at the end of the month.

2)   You find yourself with an extra $100 at the end of the month. Once again, you must make your budget balance. You can add the $100 to a category of your choice (savings, vacation savings, emergency fund, or a category of your choice). 

You may think that this is a lot of effort, but it’s really worth it. We think you will be surprised. It’s like a game that you play. It’s rather fun. It’s so refreshing to end each month feeling calm and peaceful. You’re certainly not going to miss the stress and anxiety.

We learned about the zero-based budget from Dave Ramsey. We’re so excited about it. It has changed our life! 

We think it will change yours too. We highly recommend that you pick up a copy of his best-selling book Total Money Makeover. It will likely be one of the best investments you ever make for yourself.

35% of Americans have debt in collections

This really surprised us.

We never imagined that such a large percentage of people have debt currently in collections.

Here’s something else that really surprised us…

Ten percent of Americans have a debt in collection THAT THEY ARE NOT EVEN AWARE OF!

Yes, that’s true.

Your debt in collections may be an unpaid traffic ticket, a medical bill that you never received because you moved, or a health club membership that you didn’t pay in full.

One in three American consumers
currently has a debt that is in collections.

The Urban Institute 

Let’s be clear about what debt in collection actually is.

Debt in collections is a credit card balance, medical, or utility bill that is 180 days past due. It is not a mortgage and auto loan (which are not considered debt in collection because the home or auto are noted as collateral).

The damage to your credit rating can be significant.

   Just one collection account can cause your good credit score to drop by 50 to 100 points. It can affect a new employers hiring decision, restrict your ability to get a mortgage and increase your insurance costs.

A debt in collections can remain on your credit report for up to seven years.

 Here’s what you can do… 

Make it a PRIORITY to pay your bills when they are due. Contact your lender if you are experiencing a financial hardship that may affect your ability to pay your bill in full. In many instances, your lender will adjust your payment schedule. (It’s actually in their best interest to do this. It’s better to have a borrower that is paying something monthly than nothing at all).

We feel it’s very important that you check your credit reports annually. You assume that everything listed on your report is correct.

You should MONITOR YOUR CREDIT SCORE OFTEN. We suggest checking it four times a year. This way you can catch it quickly if there is an error. Some credit cards let you check your score when you view your account balance online. We’re able to check our scores monthly with this valuable feature.

56% of Americans have less than $10,000 
saved for their retirement

Yes, you read that right.

We would say that is one of the most FRIGHTENING statistics ever.

Most Americans don’t even have enough
saved to finance one year of retirement

GoBankingRates.com

Many people say “I’ll just keep working if I can’t afford to retire”. You may think that is sensible, but you’re actually placing a big risk upon yourself. You might not be able to continue working if you run into a situation you don’t anticipate (like a medical problem).

What happens to you then?

Some more disturbing statistics…

42% of Millennials (18-34 years old)
have not begun saving for retirement.

Almost 75% of Americans over 40 years old
are behind on saving for their retirement.

28% of Boomers and Seniors (55+)
have NO RETIREMENT SAVINGS AT ALL!

GoBankingRates.com​

 Here’s what you can do… 

If you haven’t begun saving, enroll in your company 401K plan or start a Roth IRA on your own. You have to start now. Choose a low cost stock or bond index fund that is diversified over many different securities.

You can deduct a small percentage at first if you are concerned about how it will affect your income. We think you are going to be surprised. Most people barely notice a difference in their income. After a few months, start increasing the amount you invest by one percent every month or two.

If you already have started saving, be sure to bump up your savings rate to 15%. You need to invest at least that percentage in order to accumulate enough money to retire securely.​​​​​​

66 million Americans have no emergency savings at all​

66 million Americans have no emergency savings at all​

Sometimes even a small expense can hurt.

An unexpected automobile repair, a chipped tooth, or a veterinarian bill would force many to resort to extreme measures in order to meet the unexpected event.

Tens of millions of Americans
have $0 dollars saved for an emergency

   Only 63% of Americans have enough savings to pay for an unexpected $500 or $1000 expense. In order to pay their bill, 23% are forced to cut back on spending, 15% charge the bill to their credit card, and 15% borrow money from friends or family.

An unexpected expense of $5000 or more would be CATASTROPHIC for most people. Events of this magnitude don’t happen often, but they do happen. People sometimes lose their jobs and have no income coming in for an extended period of time. Heating systems get old and sometimes have to be replaced within a day or two.

You just don’t know what life has in store for you.

 Here’s what you can do… 

Don’t be caught unprepared.

Protect yourself by CREATING AN EMERGENCY ACCOUNT. An initial goal of $1000 should be a top priority. This will cover most unexpected events. Try to set this up quickly (a month or two). The easiest way is to sell some things you are not using.

You will rest easier once you have reached the $1000 level, but that certainly doesn’t mean that you should stop. Set up a plan with your bank to have at least $50 to $100 a month transferred from your checking account into your emergency account. Your ultimate goal is to accumulate 3-6 months of income.

$2000 – food thrown away annually​ by the average American family

What can you do with two thousand dollars?

You could fund an emergency savings account. That would be a big help if you’re one of tens of millions of Americans who have $0 dollars saved for an unexpected automobile repair or a dental bill.

You can invest it in a retirement account. Contribute $2000 a year for 30 years with an 8% return and you will end up with $246,692.

Clearly, the simple act of eliminating the amount of food waste you throw away each year can make a big difference in your finances.

 Here’s what you can do… 

Here are some quick tips on how to get started…

Buy less. People overestimate how much food they actually need to purchase. Buying 3 pound bottles of ketchup and mega-size bags of lettuce at the club store is not a good shopping strategy. You think you are saving money, but much of it ends up in the trash.

Plan your weekly menu in advance. This will save you a lot of money because you will be buying only the food you need for your weekly list.

Mrs. Wealthy Budgeter – “Keep track of what you have in your refrigerator so you don’t have to throw it out. We have a special shelf in ours where we keep leftovers and foods that are perishable. This has helped us reduce our food waste to practically zero”.

Watch those expiration dates. Freeze what you can’t use within a few days.

$16,061 – average American household credit card debt

You must stop the bleeding.

Unpaid balances left to run month to month can cause your debt to become uncontrollable thanks to high-interest charges.

 Eliminating your credit card debt
should be your #1 priority

We feel that credit card companies are taking advantage of their cardholders who are carrying debt. They make most of their profits EXPLOITING PEOPLE by charging them high rates of interest.

This has got to stop. But it’s you who has to tell them so.

 Here’s what you can do… 

Here’s our plan to reduce and eliminate your credit card debt. It’s not easy, but it’s certainly worth it.

It’s difficult to pay down your balances if you’re paying high-interest rates. You must eliminate those $100+ month interest payments.

We recommend that you use a credit card that has a balance transfer option that lets you pay off your high-interest credit cards at 0% interest for at least 18 months. This way you could apply 100% of your future payments towards the balance of your charge. (NOTE – balance transfers typically charge a one-time fee of 3-5 percent. This may seem unreasonable, but it sure beats paying the sky-high rates of credit cards).

Pay cash for everything. This will give you a chance to catch up on your credit card debt. YOU WILL SPEND LESS WHEN YOU PAY CASH. The act of counting out cash hurts. Certainly much more than swiping a piece of plastic. Paying cash is one of the most effective ways to reduce your expenses.

Place your credit card in a place where it is not easily accessible. Your credit card will still be available in case of emergency, but it should not be carried with you each day. Another words, you won’t be tempted to run up a balance on your cards again.

Look for opportunities to actively pay down your credit card balance. CUT YOUR EXPENSES to the bone. Sell something. Get a second job delivering pizzas if you have to. Wash cars, mow lawns, tutor, or wait tables. Throw every extra dollar at this expense and pay it down quickly.

Finally, set a goal. Finish paying your card balance off by the time your balance transfer comes due.

$28,535 – auto loans in the average American household

We’re amazed.

It seems like so many of the vehicles we see on the road today are late model BMW, Lexus, and Mercedes. One would think the average consumer must be doing very well financially.

Unfortunately, that is not the case.

Actually, most of those owners have longer term auto loans and leases that are driving them deeper into debt.

The average new car loan – 69.3 months – 
(nearly 6 years!)
Average loan amount – $31,000
Average monthly payment – $517

Edmunds 

Many car owners have terms longer than that.

   Long term loans of 73 – 84 months and longer account for 29 percent of all new car loans. That’s unbelievable!

It’s no surprise, that with payments so high, people are having trouble keeping up with their payments. 

The number of delinquent loans is soaring.

Banks seem to be contributing to the problem. In the not too distant past, banks would turn down many loans if they felt they would go bad. This has changed. They are comfortable lending now because it’s easier to take back the vehicles. Devices that are installed in new vehicles let collection agencies remotely disable the vehicle if the borrower cannot make the payments.

 Here’s what you can do… 

Don’t get sucked into this money drain. The benefit of having something shiny in your driveway isn’t worth the FINANCIAL PAIN that may occur if you can’t make the payments.

We’re not against expensive automobiles – if you earn enough income to afford driving them and are already fully funding your retirement account, children’s 529 college plan, and emergency account. The only problem is that many aren’t even coming close. They are paying more than $500 a month to finance an auto loan, but are contributing little or nothing towards their retirement account. They lose their job when their employer gets bought out and don’t have any money socked away for an emergency.

   There are much better options. We are very impressed with the FIRE movement that is becoming popular. FIRE means Financially Independent, Retire Early. People are challenging the status quo and living life on their own terms. They are saving over 40-75% of their income and retiring decades early. This is certainly exciting! We’re going to be talking a lot more about this soon. 

Your best option is to buy a highly-rated used car (about a year or two old) that doesn’t break down often. Look within the April issue of Consumer Reports for a listing of cars that are recommended. A car like this has already substantially depreciated (you have heard about how a car is worth thousands less once it’s driven off the lot). Concentrate on paying your car off within two years. This will enable you to drive it for many more years with no payments. 

$37,172 – average student loan debt

Imagine graduating college with tens of thousands of dollars in debt.

Talk about a tough start!

The average graduate has accumulated more debt than ever before.

Many college graduates are FORCED TO DELAY PURCHASING A HOME OR EVEN GETTING MARRIED because they have already accumulated so much debt.

59 percent of millennial graduates
have no idea when their loans will ever be paid off.

We have watched many students enroll in expensive colleges even though their chosen career is not financially rewarding. This is an enormous burden that can encumber one with substantial monthly payments for decades. Taking on a large debt of $100,000 for a career that pays $25,000 annually is not a wise choice.

 Here’s what you can do… 

There are many ways to reduce (and even eliminate) the need to take on college debt.

Here are three that will make a difference…

Don’t take on more loans than you expect to earn in your first year starting salary.

Search for as much money as you can find. Scholarships and grants don’t have to be paid back. APPLY FOR EVERYTHING. There are many opportunities that hardly get any inquiries.

Find a part-time job during college. Try to work full-time during the summer if you are not taking classes.

$61,243 – current government debt per U.S. resident

$61,243 – current government debt per U.S. resident

OK, everyone.

Get ready to see something that will take your breath away.

Brace yourself while you watch (in real-time) the debt of the United States of America accumulate at a lightening fast pace.

This is a MUST-WATCH for everyone…. Click here to view

For those who are interested… you can watch country and individual state debt calculators by accessing the buttons in the upper left corner.

How did we ever get into such a mess?

We talking about more than 21 trillion dollars of debt!

Are you aware that we’re accumulating interest of $5,393 dollars a second?
Click here to see this!

Stunning to see, isn’t it?

$280,000 – the amount of interest incurred by the average American in their lifetime.

We couldn’t believe this figure when we first read it. It didn’t seem possible. 

That’s more than a QUARTER MILLION DOLLARS in interest alone!

Surprisingly, when we looked into it further, we discovered that many people pay much more than that!

Let’s take a moment to learn how this figure was calculated…

The total amount of lifetime interest ($280,000) was based on a 30-year mortgage, an average car loan balance of $22,750 (assuming nine cars over a lifetime), and 40 years of revolving credit card debt.

Using a formula that incorporates a state’s average credit score as well, Credit.com has determined that residents of Washington DC pay the highest lifetime interest ($451,890) and Iowa the lowest lifetime interest ($129,394).

The states where you pay the highest amount
of lifetime interest 

1. Washington DC – Capitol ($451,890)
2. California (368,745)
3. Hawaii ($312,747)
4. New Jersey ($309,500)
5. New York (300,031)
6. Maryland ($294,720)
7. Virginia ($280,516)
8. Washington ($267,964)
9. Massachusetts ($261,220)
10. Colorado ($255,232)

The states where you pay the lowest amount of lifetime interest

1. Iowa ($129,394)
2. Nebraska ($137,174)
3. Wisconsin (144,127)
4. Maine ($154,340)
5. North Dakota ($157,011)
6. South Dakota ($157,136)
7. Montana ($160,849)
8. Pennsylvania (163,513)
9. West Virginia (166,232)
10. Vermont (167,042)

 Here’s what you can do… 

 Here are four ways you can reduce the amount of interest you pay in a lifetime…

Don’t buy a larger home than you need.

Buy a late model used car instead of new or leasing

Follow a financial plan and pay your cards in full

Increase your credit score by paying your bills on time
and not taking on too much debt.