These Financial Statistics Of The Average Person Are Eye-Opening
Have you ever thought about how your finances compare to those of the average person?
What's the typical amount people have saved for retirement, or how does your income measure up to the average annual earnings?
Examining these numbers can provide valuable insights into your financial standing and help you determine if you're doing better or worse than the average person.
It's worth paying attention to because some of these comparisons might be quite eye-opening.
How much do you Spend?
The U.S. Department of Labor Statistics highlights that the typical household spends approximately $5,577 per month.
Over the span of a year, this amounts to around $67,000 in annual expenditures.
Essentially, to maintain a decent standard of living, a household would need to bring in this much income each year.
This total encompasses various expenses, including significant ones like housing, transportation, and food, which collectively consume a large portion of the average budget.
To delve into specifics, housing accounts for $1,885 per month, making up 34% of total spending.
Additionally, $691 per month is allocated to food expenses, while transportation costs amount to $913 per month.
What is your Net Worth?
Keeping tabs on your net worth is a smart move as it allows you to track your wealth-building progress easily.
Net worth serves as a useful indicator of your financial health, helping you pinpoint areas of strength and areas needing improvement.
To calculate your net worth, you add up the value of all your assets, such as your home, vehicles, and other possessions, along with your retirement savings, and then subtract all your liabilities, like outstanding mortgages.
Surprisingly, the median net worth for households in the U.S. stands at approximately $122,000, according to data from the Federal Reserve.
- For individuals under 35, the median net worth is less than $14,000,
- while for those aged 35 to 44, it's $91,000,
- and for those aged 45 to 54, it's $168,000.
- The figures further increase with age, reaching $212,000 for ages 55 to 64
- and $266,000 for ages 65 to 74.
These net worth benchmarks are achievable with a reasonable income and some financial discipline.
Do you have any Debt?
According to WalletHub, the average household carries $9,260 in credit card debt, which is considered one of the most detrimental types of debt to have.
One major issue with credit card debt is the exorbitant interest rates attached to it.
If you're facing interest rates of 15%, 20%, or even 25% on your credit card debt, it significantly surpasses the potential returns you could earn through stock market investments.
This essentially nullifies any progress you might be making towards retirement savings.
Additionally, credit cards often promote unnecessary spending, leading to much of this debt being incurred due to overspending on items that aren't essential.
Purchases like:
- clothing,
- electronics,
- small appliances,
- and impulsive online buys
likely account for a large portion of this debt, with many of these items depreciating rapidly in value over time.
The straightforward solution to this issue is to ensure you pay off your credit card balances in full every month.
It's crucial to only make purchases within your means and consider using a debit card if necessary to avoid accumulating unnecessary debt.
How much is the Median Income?
When you work for your paycheck, have you ever wondered how your earnings compare to the average worker's?
According to data from the U.S. Department of Labor Statistics, the median income for a full-time worker is around $1,041 per week, or roughly $52,000 per year, based on a standard 40-hour workweek.
This translates to approximately $26 per hour before taxes.
It's important to note that this income figure pertains specifically to individuals and does not include household income, which encompasses the total income of all household members, including spouses and dependents.
Recent data from the Federal Reserve reveals that the median retirement savings among all adults is $65,000, although this figure accounts for individuals with retirement accounts only.
Shockingly, about one-fourth of Americans do not possess a retirement account at all.
- For those aged 25 and younger, the median retirement account balance is $1,786,
- while individuals in the 25 to 34 age bracket have a median balance slightly exceeding $14,000.
- This figure increases to nearly $88,000 for those aged 65 and older.
These relatively low retirement savings figures are concerning, especially when considering that the average household will likely require a retirement nest egg of at least $500,000, if not more, alongside other sources of income, to retire comfortably.
However, simply saving a small percentage of your paycheck and consistently investing it could significantly improve your retirement savings position compared to others in your age group.
How much Savings do you have?
The amount of money the typical person saves can fluctuate from year to year, influenced by various factors such as the overall state of the economy.
According to data from the U.S. Bureau of Economic Analysis, the average savings rate hovers around six percent.
This means that individuals typically set aside approximately six percent of their income after taxes for savings.
These savings might be earmarked for various purposes such as:
- purchasing a home
- renovating a house
- buying a new car
- funding college tuition
- saving for retirement
- covering unexpected expenses
After allocating funds for short and medium-term savings goals, there's often not much left over for retirement savings.
For instance, consider that the average down payment on a home is $62,000, while the typical kitchen renovation costs around $26,000, and a new car comes with an average price tag of over $47,000.
Financial experts generally recommend that individuals save at least 10 to 15 percent of their income specifically for retirement, with even higher savings targets if the goal is to retire early.
Additionally, it's important to set aside funds for other future purchases or expenses you may have in mind.
What about Social Security?
According to the Social Security Administration, the typical monthly benefit amount is approximately $1,550.
Many individuals depend solely on this Social Security income as their primary source of retirement funds.
For those who lack additional retirement savings, this amount may need to be supplemented with earnings from a job to make ends meet.
It's important to note that the average payment of $1,550 per month is just an average figure, and individuals who had lower earnings over their working years may receive even less.
Some individuals may not factor in Social Security income when planning for retirement, viewing it more as an added bonus rather than a reliable income source.
Additionally, the actual benefit amount can vary based on the age at which you choose to start receiving it.
Fortunately, most people can obtain an estimate of their future benefit based on their earnings history through the Social Security Administration's website.
Do you have enough for Retirement?
Many individuals aspire to retire early to escape the daily grind of work.
However, Ramsey Solutions reveals that the average retirement age is 61, despite the fact that most people aren't eligible to receive their full Social Security benefits until age 67.
To provide context, individuals who reach the age of 65 can anticipate living for an additional 19 to 21 and a half years, as per data from the Social Security Administration.
Retiring in your early 60s typically means you've been part of the workforce for about four decades.
For those who start investing early, this extended period offers ample opportunity to benefit from compound interest.
Nonetheless, retiring at age 61 raises questions about whether there will be enough time to engage in enjoyable activities.
While individuals at this age often enjoy good health and mobility, it's essential to consider how many years of vitality remain to pursue hobbies and interests.
What is your Credit Score?
Credit scores range widely, from as low as 300 to as high as 850, with the average FICO score standing surprisingly high at 715, as reported by Experian.
While some individuals may downplay the significance of a good credit score, having a respectable number can offer significant benefits for most people.
If you anticipate using any form of debt in the future, it's crucial to monitor your score closely.
Your credit score influences the mortgage rate you'll qualify for when purchasing a home or rental property, as well as the terms you'll receive for a car loan and other types of potentially low-interest debt.
Fortunately, maintaining a good credit score is relatively straightforward, primarily involving timely bill payments.
According to Experian, your payment history is the primary factor affecting your credit score, followed by:
- your credit utilization ratio,
- credit history length,
- types of credit accounts,
- and the amount of new credit you've recently applied for.
It can be challenging to accurately assess your financial situation, often leaving you feeling like you're falling short of where you ought to be and making minimal progress.
However, exploring these financial statistics of the typical individual may offer some unexpected revelations and shed light on your financial health.
You may discover that, in several aspects, you're actually faring better than the average person, providing you with the encouragement needed to keep striving for improvement.
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- Ivan