The rules that financial pros say people should follow if
they want to build wealth are usually straightforward — pay your bills on time,
have cash on hand for a rainy day and invest money for your future. Sounds easy
enough, but for many people these milestones can feel out of
reach. A slew of surveys and economic reports released recently shed
light on how well Americans are handling their money. Wondering where you
stand? Take a look:
Debt payments. Consumers
have become much better about paying their bills on time since the recession,
with delinquencies for major loan types dropping nearly across the
board. This is good news because, as Washington Post columnist Michelle
Singletary has said again and again, one of the easiest ways to improve
your credit score is to pay your bills on time. The share of closed-end
loans, such as car and personal loans, that were late by 30 days or
more dropped dramatically in the second quarter to 1.36 percent of accounts,
far below the 15-year average of 2.27 percent, according to new data from
the American Bankers Association. Closed-end loans are for a set amount,
unlike credit cards or lines of credit, which allow balances to change from
month to month.
Housing costs. Financial advisers
generally recommend that consumers not spend more than a third of their total
pay on housing, to free up cash for saving, paying down debt and spending on
other necessities. But whether you rent or own, chances are you are struggling
to stay under that threshold. About 20.7 million rental households — or
about half of all renters — spent more than 30 percent of their income on
housing in 2013, according to a report from the Harvard Joint Center
for Housing Studies. For about 11 million of those households, the rent bill
ate up more than half of their paycheck.
For homeowners, monthly mortgage payments, including
property taxes, mortgage insurance and home insurance, took up about
36.5 percent of the average national wage in the first quarter of 2015, down
from 37.4 percent a year earlier.
If you have any savings, you’re ahead of the game. Some 62 percent of
Americans have less than $1,000 in their savings account, according to
a survey of 5,000 consumers by GoBankingRates. That includes 21 percent of
those surveyed who said they didn’t even have a savings account. The
findings are in line with a similar study by Bankrate.com,
which found that 29 percent of people don’t have an emergency fund.
Despite the steady job growth of recent years, many
Americans are struggling to save. Financial advisers and economists blame low
wage growth, which might make it difficult for families to keep up with rising
rent costs and growing child-care expenses. But
it’s not too late to establish the habit. Financial advisers say people who
save with a specific goal in mind — a vacation, a new car or to buy a home, for
instance — may be more motivated to stick to their plan. Open a separate saving
account and have the money funneled into the account automatically on a weekly
or daily basis.
Retirement savings. People are
getting better about saving for retirement. For the first time, the average
amount that employees and employers contributed to 401(k)s topped $10,000
this year, according to Fidelity Investments. The numbers show that
both sides are putting more funds toward retirement, an important shift as
companies continue to move away from pensions and the future of Social
Security remains uncertain. But despite the improvement, many workers are still
not saving enough. Many young workers are putting off saving until
they’re older and making more money, a mistake that cuts down on how much
time their savings have to grow and requires them to save much more later
just to catch up.
Some workers who were automatically enrolled into retirement
plans also make the mistake of thinking that the default contribution
amount chosen by their employer — which is often as low as 3 percent — is
enough. If you aren’t there yet, increase your savings rate as much as you
can now and then sign up to have your contributions increase automatically by
one or two percentage points each year.
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