Financial security: It’s a concept foreign to millions of Americans. The thought that you have enough money to pay your rent, phone bill, and put food on the table is a pipe dream for a lot of people. Although you might have a job and enough cash flow to make ends meet, feeling true financial security is a long way off in most households.
The average American is working on thin margins. If you take a peek in the typical American bank account, you’re going to find around $4,400. Although some people might rejoice at the thought of having a comma in their account, that $4,400 isn’t really enough to provide peace of mind. Consider that there are rent or mortgage payments always creeping up, debt payments on credit cards or student loans, and the fact you need to pay for transportation and meals.
Suddenly, that financial cushion is looking pretty thin. How much financial padding would it take to provide a real security blanket? New data from money management service Banktivity provide us with some answers.
Defining ‘financial security’
What do we mean when we use the phrase “financial security”? Essentially, you have enough money to cover your basic expenses for the foreseeable future. Most financial advisers would say you need an emergency fundto cover between six and 12 months with no income. So, if you lost your job, you’d have a year or so to get yourself together and find a new stream of income.
This, of course, is difficult for many households to piece together. Given that millions of Americans are living paycheck to paycheck, squirreling away even a small percentage into savings every pay period can be difficult. But it can be done. And it’s the first step toward attaining financial security.
Americans, by the numbers
According to Banktivity’s data, 2 out of every 3 Americans are living paycheck to paycheck. As such, the following shouldn’t come as much of a surprise:
- 58% would struggle to pay a surprise $500 bill.
- 68% lack substantial savings.
- Despite these figures, 33% felt that they were “financially savvy.”
- The average American wastes $140 per month.
These figures might be at odds with other research out there, but from them we can conclude a majority of Americans are struggling. The data show one thing we’ve already covered, and that’s the top way Americans are wasting their money is through spending on food. That means there are opportunities to save more, on a positive note.
What it takes: About $80,000
The key figure Banktivity’s team uncovered was the exact dollar amount needed to grant financial security. That number? $80,594.
This is what it would take to allow the average American to sleep at night and not worry about surviving in the event of a job loss or some other disruptive life event. That $80,000 figure can seem insurmountable to many Americans, who, as we know, are struggling with just making it to the weekend.
The reality of the average American’s finances
We already discussed what the average American has in their bank account, which is around $4,400. But what about savings, investments, and retirement accounts? These numbers can help us put together a complete mosaic of the typical person’s financial fitness and see just how realistic attaining that magic $80,000 number is. Here’s what we’ve found:
- We’ll start with what’s in the average bank account, which is $4,400.
- For retirement, Americans have a median amount of $69,000 saved.
- Average household debt? $132,000.
- The average Social Security check (if applicable): $1,250 per month
These numbers might not make you feel any more confident, but they’re a starting point.
Building a roadmap
Even if you have managed to save a bunch of money for retirement and have four digits in your checking and savings accounts, hitting the $80,000 threshold can be a stretch. Remember, these are averages, and that might not necessarily be descriptive of a typical American family’s financial health. Many people, for example, might scoff at that $69,000 retirement savings figure — especially given that a lot of people can’t even pay all their bills each month.
But the steps to building wealth are out there. There are two ways to improve your financial standing: Increase your income by getting a raise or new job, and reduce spending. If you’ve cut your spending to the bone, you can always start fishing for a raise, promotion, or better-paying job.
From there, it’s a matter of building up an emergency savings fund, starting to save for retirement, and ultimately throwing money into investments. Yes, this is overly simplistic, but it’s a basic framework to work with.
When it comes to building your savings, the first step can be as small as you want. If you can only stash away $10 — be it under your mattress or transferred into your savings account — that’s a start. Also, begin looking for ways to increase that amount, and make it a goal to start saving weekly, monthly, or whenever you get your paycheck. Can you save a few bucks with a cheaper lunch option? Take that saved money, and augment your contribution.
There are opportunities to cut spending all around you if you can get creative. All the while, starting engaging in some Genghis Khan-like career tactics to increase your income. You might be in a dead-end job, but that doesn’t mean you have to stay there. Ask for a raise or promotion, or start applying at other places. Eventually, something will break your way. When it does, you should (hopefully) have at least a little bit of money saved up.