When you come across statistics about how the average American handles money, it’s easy to feel really good about yourself. If you’re outperforming the average, you probably feel reassured.
But when it comes to money, beating the average isn’t enough.
The average American is, well, bad with money. As a nation, American debt is staggeringly high. We have little in savings, low retirement balances, and carry loads of debt.
Instead of comparing yourself to the average person, use other calculations and tools to evaluate your finances. That approach will give you a more accurate picture of your security.
Here are four areas you can outperform the typical American — and be better with your money.
1. Emergency fund
Nearly 50 percent of Americans can’t come up with $400 in an emergency, according to The Fed. That’s not just people who are low-income either. That percentage includes middle-class and even high-earning individuals.
We tend to spend money as soon as it comes in, meaning that a single unexpected car repair or medical bill could wipe out our savings and leave us desperate.
If you have $400 in savings or a bit more, don’t get too complacent. That’s not nearly enough to care for you or your family in an emergency. A small crisis would empty your bank account, and a major event such as the loss of a job would be a complete disaster.
Instead, you should aim to save six to eight months of living expenses in an emergency fund. If you lose your job or have a medical emergency, you’ll have plenty of breathing room if you save that much.
Putting that much money away might seem impossible. But building a regular savings habit and contributing every month will help you see results over time.
2. Retirement savings
The average retirement savings is difficult to calculate because so many people don’t have anything saved for retirement at all. The median retirement account has between $10,000 and $25,000 saved, according to a Government Accountability Office report. This leaves most people grossly unprepared to retire.
For a simple calculation of how much you need, experts recommend multiplying your income by 25. For example, if you make $50,000, you would need $1,250,000 in retirement.
When you’re starting out and struggling to make ends meet, saving over a $1 million can seem like a pipe dream. But by taking advantage of compound interest and employer-offered retirement accounts and contribution matches, you can build a large nest egg.
3. Student loans
Student loans have become the norm when it comes to paying for college. Over 44 million borrowers have student loan debt and 2016 graduates walked away with an average loan balance of $37,172.
Keeping up with the minimum payments isn’t enough. If you had $37,172 in loans with a typical 5.7% interest rate, it would take you 10 years to pay them off with a monthly payment of $407. You would pay $11,681 in interest charges on top of your original amount.
Such a large debt can keep you from pursuing other goals, such as getting married, moving, or starting a business. Instead, you should accelerate your payments by increasing your income or refinancing to get a lower interest rate. This will help free you from the burden and save you money over time (see for yourself using our calculator below.
Student Loan Refinancing Calculator
4. Credit card debt
The average household with debt has a credit card balance of $9,600, according to CreditCards.com. Credit card debt can be difficult to overcome. High interest rates cause the balance to balloon, so you end up paying far more over time.
Minimize credit card debt by tracking your spending, using a cash budget, or making extra payments. This can save you money and prevent your balance from getting out of control. If you use credit cards strategically and pay off the balance in full each month, you’ll be in far better shape than most people.
If you don’t know where to begin, credit card consolidation can help you manage your debt by reducing your interest, so more of your payments go towards the principal. With this approach, you take out a personal loan and pay off your expensive credit cards. If you have discipline, consolidating your debt can help you take back control.
Managing your finances
While it can be comforting to compare yourself to the average American, it’s important to keep things in perspective. The typical person is not where they need to be when it comes to money. Many carry high debt balances and don’t have a positive net worth. Those issues can have long-lasting consequences for their futures.
Instead, focus on your own unique situation and personal financial goals. By not comparing yourself to others and prioritizing your debt and savings, you can build financial security.
For more information about improving your finances, check out these money-saving life hacks.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 5.64%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.28%3||Undergrad & Graduate|
|1.89% – 6.77%4||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.41%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews! |
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.
5 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.