Personal and Nationwide Financial Statistics in America

Americans have more debt than any other country in the world. But is that necessarily a bad thing?

If you can quantify it, then you can measure it. If you can measure it, then you can evaluate it.

This statement was the mantra of my statistics teacher and it rings true whenever you are trying to objectively capture the progress – or lack thereof – in personal or nationwide metrics.

Whether it is our personal finances, income, household debt, GDP, consumer spending, and other concepts crucial to gauging the health of the economy, either at a micro or macro level, analyzing quantitative measurements is vital.

In addition, enumerating national figures helps to serve as a benchmark, a point of reference from which you as an individual can locate your own situation within the larger context of the economic landscape around you. In other words, how it lets you know how you stack up against everyone else.

While income and standard of living varies between countries, we’ll draw our inspiration from the United States as a common ground benchmark since many countries basically outsource their monetary policy to the dollar as the default currency for international exchange and transactions.

Personal Finance Statistics

Ideally, personal finance involves managing your income and expenses smartly, and adequately saving and investing any surplus into worthwhile ventures.

Personal finance statistics takes into account not only a living wage but also how that wage is treated.

People usually have the misconception that finances only revolve around how much money you make. Obviously you should strive to earn a living wage, but a good financial strategy is more about how you treat the money you have, than how much you have.

Unfortunately, there are a lot of dismay numbers when you look at the statistics concerning personal finance, as documented by groups such as the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation, which releases a National Financial Capability Study every three years (first released in 2009)[1].

Their study, among other things, finds that:

  • In the U.S., 19% of people surveyed stated that during the past year, their expenses exceeded their income (excluding big ticket purchases such as a vehicle, a home, or any large expense).
  • Medical bills that are past due in the U.S. were reported to stand at 23%.
  • In a subsequent study also done by FINRA, it was discovered that 46% of individuals in the US lack a fund to cover rainy day expenses to last up to three months, such as emergencies like sickness, job loss or other kinds of economic downturn.

Financial Literacy: The Whodunnit of Financial Misdemeanors

The worst culprit in this saga, the whodunnit in this personal finance “crime scene” that produces the force multiplier that aggravates people’s financial risk is a lack of financial literacy.

Financial literacy helps keep people out of bad financial situations. However, because most Americans have financial literacy that is at a low level, they find it challenging to apply sound decision-making skills at a financial level to real life situations.

People need to possess some bare minimum financial knowledge to budget effectively and make sound financial decisions. In another study done by FINRA, on Financial Knowledge and Decision-Making, the study participants were confronted with five questions spanning parts of economics and finance encountered in everyday life.

These survey included questions on concepts such as inflation, compound interest, risk and diversification principles, the relationship between bond prices and interest rates, and so on.

Below is a graphical representation of the results:

US Financial Literacy Data
  • Unfortunately, 66% were unable to answer more than three of the five questions correctly.
  • Only 34% were able to successfully answer four or five questions on a rudimentary financial literacy test correctly.
  • However, the graph on the right shows that over the past decade, there has been a substantial uptick and improvement in financial literacy.

In analyzing the impact of personal income and financial literacy, we cannot afford to ignore millennials. This is because they are the largest, most diverse and most educated generation in American history.

However, although millenials are the most educated demographic, this hasn’t translated into a lot of rudimentary financial literacy. Findings from three recent National Endowment for Financial Education NEFE-funded research studies reveals the following:

  • Only 24 percent of millennials demonstrate basic financial literacy[2].
  • 29 percent of millennials have overdrawn their checking account in the prior 12 months[11].
  • 72 percent have a mortgage on their home, and among those with mortgages, 24 percent have been late on mortgage payments.
  • Although 36% of millennials are savvy enough to already have a self-directed retirement account, 22% either took a loan or made a hardship withdrawal in the prior 12 months.

Family Income, Net Worth, and Economic Performance

The US Federal Reserve Board’s triennial Survey of Consumer Finances (SCF) gathers information regarding family incomes, net worth, credit use, balance sheet components, and other financial outcomes that are pertinent to evaluating the financial health of US families.

The 2017 SCF[7] study reveals that there have been broad-based gains in both income and net worth since 2013 when the previous survey was last conducted.

  • Between 2013 and 2016 surveys, real gross domestic product (real GDP for short) grew at an annual rate of 2.2 percent,
  • The unemployment rate fell from 7.5 percent to 5 percent (these are the results of the aforementioned surveys, but they are much lower as at the time of this writing)
  • The annual rate of change in the consumer price index averaged 0.8 percent

As a result of these largely favorable changes to aggregate economic performance, many families experience broad-based economic gains.

Below, we have highlighted some of the most salient observations concerning families, especially with regard to income that the SCF report illuminated:

  • Within the timeframe of the SCF survey, median family income grew 10 percent,
  • In addition, mean family income grew 14 percent
  • One of the best news in this survey is that between 2013 and 2016, families throughout the income distribution experienced gains in average real income growth. This reversed a trend from 2010 to 2013 when real incomes either fell or remained stagnant for all but everyone on top of the income distribution curve.
  • Unfortunately, in tandem with the much troubling rise of income inequality, those families situated at the top of the income distribution saw larger gains in income within that same period compared to other families.
  • Families lacking a high school diploma had bigger corresponding gains in income than others between 2013 and 2016.
  • Families that are both nonwhite and hispanic also experienced higher comparable increase in incomes than other families between 2013 and 2016.
  • Underscoring the value and importance of education as a facilitator of income however, more-educated families and white non-Hispanic families continue to have higher incomes than other families

Income, Average and Median Net Worth

United States Real Median Personal Income Data

Personal income and other expense trends gathered by the Bureau of Economic Analysis (BEA) show the following[8]:

With regards to income, other increasing after several years of stagnation, yet

  • Based on an analysis of Bureau of Labor Statistics and U.S. Census Bureau data, medical expenses are growing faster than income: the past decade alone has seen medical expenses grow 33%, while median income growth lagged by 30%
  • According to the estimates released in November 2019 by the Bureau of Economic Analysis (BEA), personal income increased $101.7 billion (0.5 percent)
  • Meanwhile, disposable personal income (DPI) grew to $87.7 billion (0.5 percent) and personal consumption expenditures (PCE) bumped up to $64.9 billion (0.4 percent) within the same analysis.
  • The Bureau of Labor Statistics confirmed that the median personal weekly income for all full-time workers in 2017 is $865.
  • The annual median personal income in 2016, according to the U.S Bureau of the Census, stood at $31,099.
  • Many full time workers suffer from sleep deprivation, costing the US economy roughly $411 billion in 2019 (and this number is growing year over year).
  • Real per-capita disposable income, as of October, 2019, is $45,646.
  • Nearly 84% of millennials either own a website or use social media daily as a means to support their income, according a recent Pew Research poll.

Below is data showing the real median personal income in the United States:

US Real Median Personal Income
Above is data showing the real median personal income in the U.S.

Retirement

According to an old Chinese proverb, “The best time to plant a tree was 20 years ago. The second best time is now.” That should be the mindset and attitude you should use adopt regarding retirement savings, even if you have fallen further behind than you would have wanted.

What is considered as retirement income?

At age 65, the retirement income, defined broadly to include all of the usual suspects such as housing, is calculated by projecting the assets that households will hold at retirement, based on the steady relationship that exists between age and wealth-to-income ratios, which is evident from the 1983-2016 Surveys of Consumer Finances (SCFs).

The National Retirement Risk Index (NRRI) evaluates how many families comprising of working-age are deemed to be at risk, that is having the inability to maintain the standard of living they had prior to retirement.

For the most recent year of the SCF (2016), the overall risk is 50%, which compels the need to ask to what extent higher rates of saving can be used to reduce the percentage of households at risk.

National Retirement Risk Index

According to the National Retirement Risk Index (NRRI) which measures the percentage of households at risk of being unable to maintain their pre-retirement standard of living:

  • 50 percent of households are classified as “at risk” of not having enough funds to sufficiently maintain their standard of living in retirement.
  • Boosting the 401(k) contribution rate for eligible workers by 5% points while commendable, would only modestly reduce the overall retirement risk.
  • However, in order to make dramatic progress in overall retirement index rates, there is a compelling need to combine both savings along with working two years longer.

Cost to Saving for Retirement

If you’ve starting saving for retirement, that is great news. And the more you save, the better for you and you’re retirement prospects. But you need to be clear-eyed regarding the cost-benefit analysis, and the sacrifices necessary to attain your goals.

You can’t eat your cake and have it, as the expression goes. One of the most challenging aspects to saving is the opportunity costs associated with it, especially in terms of the life experiences you’ll miss while you’re storing away funds for your winter years.

For example, if you save $3,000 in your 401(k) instead of going on your dream vacation, that $3,000 will grow, but at the opportunity cost of your dream vacation.

If you are planning to retire by 65, the researchers at the Standards Center of Longevity have projected that you need to save between 10 to 17 percent of your present income in order to maintain your standard of living. And that projection is based on starting as early as 25 years!

Personal Savings Stats

Americans excel at a lot of things. Unfortunately, saving their income isn’t one of them.

“A dollar saved is a dollar earned,” is a popular axiom. Yet Americans are struggling when it comes to saving, and this is despite a booming economy for the most part, coupled with increased wage growth.

The poll conducted for Bankrate’s March Financial Security Index survey highlights some of problematic data points and attitudes afflicting a saving culture:

Data of Annual Income Percentage Savings
  • 69 percent of Americans are saving 10 percent or less or their income.
  • 16 percent – which represents only a paltry 1 in 6 employees – report saving more than 15 percent of their yearly earnings.
  • But the worst par buried in this news is the fact that 21% of American citizens are saving absolutely nothing at all.
  • A survey from 20% of working adults in the US don’t save any portion whatsoever of their annual income at all. Unfortunately, even those who endeavor to save aren’t really saving much in the first place.

About two-thirds of the population, according to The Associated Press-NORC Center for Public Affairs Research, would struggle to scrounge up $1,000 in a dire emergency.

Before you conclude this statistics deals primarily with low income earners and their inability to effectively fund an emergency, however, the study points out that this category also includes many families who make more than $100,000 annually.

Analysis from the Urban Institute shows that only $250 to $749 siphoned away in a savings goes along way in assisting families avoid eviction, missing housing payments and other financial downfalls.

Obstacles to Saving: Why American’s Aren’t Saving

The Bankrate survey asked the respondents: “What is the biggest reason you aren’t saving more money?”

And this is how American’s who are currently working responded:

Why Americans Arent Saving Data
  • 6 percent of Americans who say they just haven’t been able to get around setting any money aside.
  • 22% of millennials feel this way.
  • But with the power and miracle of compound interest, if we assume a 6 percent average annual investment return, a millennial who starts at 23 to save about $14 a day can expect to be a millionaire by age 67.

However, don’t feel discouraged even if you feel you have fallen far behind and/or have to start small on your savings, because you can eventually see significant improvement in your finances if you persist with the effort.

Education is the #1 Priority for Saving

Apart from covering monthly bills, meeting living expenses, recurring financial obligations, saving for children’s education, especially college is the first priority.

  • Approximately two-thirds of Americans (67%) stated that if they became first-time parents, the costs associated with preparing for their child’s would have to be put on a credit card.
  • Almost half of them (44%) said that they wouldn’t be able to pay off their balance in full when thinking about the total amount they would need to put on a credit card.

Saving For Retirement

You can get a loan for college education, but there is no such thing as a retirement loan.

As a result, if you don’t focus on saving for retirement as a top priority, then you are putting your ability to support yourself in retirement at risk.

  • This wrong reasoning has however led 3 in 5 Americans (60%) to think that parents should pay for their children’s post-secondary education expenses, even if it means their retirement savings takes a hit.
  • Financial advisers largely advocate transferring a minimum of 15 percent of income into a savings account.

Household Debt

Data of Debt Balance and Composition

Household debt, especially in the United States comprises mainly of mortgages, auto loans, credit card and student debt.

According to the Center For Microeconomic Date (CMD) latest Quarterly Report on Household Debt and Credit, the third-quarter of 2019 marked the 21st consecutive quarter with an increase in household debt.

The total household debt is now about $1.3 trillion higher, at least in symbolic terms, than the last peak amount of $12.68 trillion which occured in the third quarter of 2008.

Although the Federal Reserve Chairman Jerome Powell signaled in November his concern concerning business debt, which he said was “historically high”; however, he wasn’t very worried about consumer borrowing.

This statement was made against the backdrop that consumer debt is currently higher than the previous peak reached during the tumultuous financial crisis of 2008 – by about $1.3 trillion!

But speaking to lawmakers on Capitol Hill, Powell said, “The ratio of household borrowing to income is low relative to its pre-crisis level and has been gradually declining in recent years.

These are the details and breakdown regarding household debt[4]:

  • In the third quarter of 2019, total household debt climbed to $13.95 trillion
  • This figure eclipsed the total household debt at the height of the great recession in 2008 under the same third quarter by $1.28 trillion
  • In 2019, the US household debt climbed by 0.7% for the third quarter. This uptick has been encouraged cheap borrowing costs, strong consumer confidence, and low unemployment.
  • This household debt also ticked up 25% compared with the post-recession value of approximately $12.7 trillion in 2008.
  • This marks the 21st consecutive quarter with an increase in household debt.
  • However, today’s debt burden isn’t as worrisome since the delinquency rate, currently 4.8 percent compared to the peak of 11.9 percent at the end of 2009.
  • Mortgages account for the lion’s share, at $9.44 trillion.
  • This mortgage value represents a $31 billion increase from the previous second quarter
  • Following at a distant second after mortgages is student loans and debt
  • Strong numbers were also posted for new extensions to credit lines such as mortgage originations including refinances, which exhibited a marked increase at $528 billion.

Loans and Credit

Debt that consumers carry over from month-to-month is aptly called revolving debt, and these usually incur lots of interest. Credit cards are a prime example of revolving debt; however, other types of debt incurred by households and individuals abound.

Student Loans

  • Student loan debt in the United States stood at $1.50 trillion in the third quarter of 2019
  • This debt ticked up by 1.4% to $1.5 trillion during this period
  • This number was up by $20 billion from second quarter value.
  • The rate of aggregate student loan default or delinquency for 90+ days in 2019 Q3 was at 10.9%
  • However, this 90+ day transition into delinquency was 9.3%, which marks an improvement from the previous quarter of the same year.

Auto Loans

  • More than $1.16 trillion was owed in auto loans as of March 2019 by Americans.
  • Almost 10% of all outstanding consumer debt in the first quarter of 2019, including mortgages, was due to auto loans.
  • 27 million – that is the number of new auto loans originated by Americans in 2018, which was approximately 183,000 higher than in 2017. However, this was 540,000 less than the 2016, which was a record-breaking year.
  • The average loan stood at $23,438, as at December 2018, which is 6.4% higher than the same amount in December 2015.
  • Gen Xers have the distinction of having the highest auto loan balances. They are the most likely of any age group to have a car loan, with a group median of $18,741.
  • Gen Xers are also the most likely to spend on counterfeit automative parts, an underground industry worth more than $45 billion annually.
  • The “seriously delinquent” category of outstanding auto debt – which is regarded as over 90 days – is 4.7% .

Credit Cards

  • Compared to mortgages, credit card debt numbers are relatively inconsequential in total, amounting to  “only” $0.88 trillion.
  • Total credit card debt that is over 90 days delinquent now stands at 8.3%. This only lags student loans (10.9 percent) in that unfavorable category.
  • The average U.S. household who possess credit card debt is now estimated to have a balance of $6,849.
  • Further worsening the bad news is that this revolving credit is costing these U.S. families what amounts to an average of $1,162 in annual interest payments.
  • 10 years or longer is the time 10% of Americans say it will take them to pay it off credit card debt,
  • and 9% don’t think they’ll ever be completely free of it

This graphic provides a breakdown of spending by both type and national average owed:

Type and National Average Owed Graphic
The silver-lining in all of this household data is that fewer Americans are filing for bankruptcy.

According to New York Federal Reserve, about 186,000 consumers had a bankruptcy notice included in their credit report during the 3rd-quarter, in comparison to 215,000 during the same period of 2018.

In another good news, according to the Federal Reserve Bank of St.Louis, the household debt-to-GDP ratio was 76% for the second quarter of 2019, which represents a significant drop from the 100% it stood at in 2009.

Other Impacts of Debt

Graph Showing Percent of Balance by Loan Type

Customer Spending

Consumer spending, also known as personal consumption expenditure (PCE). This is the value of the goods and services purchased by, or on behalf of, U.S. residents.

United States Consumer Spending Data

It is a major component of the GDP, and refers to private expenditure on goods and services. The consumer spending statistics is a popular way to gauge the strength of the economy.

Consumer confidence influences consumer spending since it is the outlook that consumers have toward both the economy and their own financial condition. When it’s optimistic, it correlates to high consumer confidence; when pessimistic, then low consumer confidence tends to follow.

United States Consumer Sentiment

These are some of the illuminating consumer spending stats for the 2019 fiscal year from the University of Michigan’s consumer confidence research:

  • In December, 2019, the University of Michigan’s consumer sentiment for the entire US was modified a little more to 99.3 from an initial value of 99.2 and then 96.8.
  • It is the highest reading since May (which was at 100) and the second best in 2019
  • The United States has averaged 86.64 points in consumer confidence between 1952 until 2019.
  •  In January of 2000, U.S. consumer confidence reaching an all time high of 111.40 points. The record low of 51.70 points had been set in May of 1980.

Personal Consumption

  • According to the estimates released in November 2019 by the Bureau of Economic Analysis (BEA), the personal consumption expenditures (PCE) increased $64.9 billion (0.4 percent) [7].
  • Consumer spending consumes nearly 68% of the U.S. economy.
  • $14.678 trillion was the rate of consumer spending as of the third quarter of 2019
  • Two-thirds of consumer spending is on services, such as housing and health care. One-fifth is spent on non-durable goods, such as clothing and groceries.

The U.S. Bureau of Labor Statistics (BLS)[10], produces data based on consumer unit (household) of spending. Its latest data through June 2018 is available as at the time of this article, and here are some of the results:

  • In 2018, the average expenditures for each consumer unit was valued at $61,224, which represented a 1.9% increase from the previous 2017 levels.
  • The Consumer Price Index (CPI) for that same period rose by 2.4%
  • Correspondingly, the average pre-tax income also rose by 6.9 percent.
  • A year-to-year comparison for the latest period under review (for July 2017 through June 2018) revealed that the average expenditures per consumer unit(1) were up 4.0% in contrast to the period between the July 2016 and June 2017 midyear average.

Other consumer expenditure discovered by the BLS for 2018 include:

  • With regard to personal insurance and pensions spending, these metrics grew by 7.8% in comparison to 2017 when it actually decreased by 0.9%. The increase was propelled by a 7.5% boost in contributions given to pensions and Social Security.
  • Food spending was up by 2.5%. This figure was boosted by both food at home spending, which increased by 2.3%, in addition to food eaten away from home spending rising by 2.8%.

Budgeting Statistics

Budgeting could have been placed under the Personal Finance section at the beginning of the article. However, we felt that since budgeting helps to keep track of finances, particularly spending and consumption, this section is well-suited to address the topic.

Budgeting helps avoid prevent runaway expenditure, while instilling discipline and focus on the big picture toward our financial goals.

According to the latest Bureau of Labor Statistics’ (BLS) data (2018) Consumer Expenditure Survey, these are the details on how Americans approached budgeting and expenditure:

  • Food: $7,923, which can be further broken down into $4,464 of food at home and $3,459 on food away from home.
  • Housing: $20,091, which comprises property taxes, utilities, rent and mortgage payments, maintenance, household services and products, and so on.
  • Apparel and services: Currently $1,866.
  • Transportation: $9,761. Apart from vehicle costs, this also comprises insurance and public transportation expenses, gasoline, maintenance, finance charges.
  • Health care: $4,968, which includes the cost of health insurance, medical services, prescription drugs as well as other medical supplies.
  • Entertainment: $3,226. Consists of both in-home and outside-the-home entertainment costs. Costs of pet maintenance are also included.
  • Personal care products and services: $768.
  • Education: $1,407.
  • Cash contributions (charity, for example): This has actually been trending downward, from $2,081, to $1,873, and then to a slight increase to $1,888 in 2016, 2017, and 2018 respectively.
  • Personal insurance and pensions: $7,296. Social Security payroll tax, is the biggest  expenditure in this category. Also, pension contributions and life insurance premiums are included.
  • Payment solutions: By 2022, revenue generated by digital payment solutions (globally) is predicted to amount to $14 trillion.

Summary

Our finances impact and permeate our lives probably more than any aspect of our existence. You may compartmentalize other aspects of your life successfully, but your spending ability and purchasing power will inevitably seep through to define who you are in the marketplace.

In short, you may hide from your finances but your money matters will find you out.

That is why money management and financial statistics are so important.

A broad-based personal and national overview such as this one is important to keep individuals attuned to the statistical trends going on around them, so they wouldn’t be caught unaware on how the economic landscape is changing.

Further Reading

See our unique insight in the following financial reviews:

 


Bibliography

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