Living on the Financial Edge

One of my favorite financial blogs is The Simple Dollar. Its founder and contributing writer is Trent Hamm who just wrote an extended, terrific post he titles, Ten Steps To Turn Financial Disaster Into Financial Independence. I encourage you to check it out.

People Do Live on the Financial Edge

Trent Hamm portrait

Introducing his post, Trent points out some of the facts about financial life in America today. The statistics are not encouraging:

    76% of Americans are living paycheck to paycheck.
  • 50% of Americans have less than three months of living expenses in total savings.
  • 26% of Americans have no savings at all.

Looking at these facts he comments, “Most Americans are walking a dangerous tightrope. A single injury, a single job loss, a single unexpected child, a single automobile accident could very easily unravel their life, causing them to lose their homes, their automobiles, and leave them unable to even get the simplest of loans.”

Living on the Edge Kills Peace of Mind

Only those who are oblivious to the realities of our economic conditions today, or have let feelings of being unable to change things anyway, refuse to face the implications of these facts. But it is not necessary to let our fears prevent us from finding a better course for our future. There are steps we can take to make financial success possible.

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A Third of Americans Are Delinquent on Their Debts

Would you believe that 35% of Americans are in collections for unpaid debt? According to a massive study just released by the Urban Institute that is the case.

What’s the Scoop About Debt?

Now you do not go into collections until the debt holder gives up and closes the account, reporting it to the credit bureaus and selling it to a collection agency. Ordinarily the debt must be over six months overdue for this to happen.

pile of debts

With two exceptions, states with the highest percentage of people into collections are concentrated in the South where incomes are lowest and the economic crisis proved more painful. Nevada, where the housing crisis was the worst, and Washington, D.C., were the other two.

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Is there a positive side at all to the debt situation? Yes, in fact there is.

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How the Financial Crisis Changed America

Today I read an article from the folks at Fidelity Investments. They completed a study in February called The Fidelity Five Years Later study—referencing five years after the financial crisis began. The participants represented adults over twenty-five years of age, financial decision makers who have investments so they were above average in their financial commitments, as I am sure are those reading this blog.

The Crisis and Financial Attitudes

Here are some of the results I think you will find interesting:

  • 42% have increased participation in workplace retirement and health savings plans
  • 55% feel better prepared for retirement
  • 42% have increased emergency fund savings
  • 80% have a better understanding of their finances
  • 49% have purposely decreased personal debt
  • 72% have less debt now than before
  • 78% say they have made permanent behavior changes

What Do These Results Mean?

As you look through this list I think you will see many reasons to be hopeful for the future, at least among the people surveyed.

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