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March 17, 2023
New Mexico’s Legal & Financial Weekly
Vol. 10.103 No. 11
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How Anxious Are Americans About Their Finances? Very.
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A
new poll paints a troubling picture of how anxious Americans are about their finances.
Nearly half of respondents said they didn’t feel “financially stable,” according to the survey from financial services firm Edward Jones and Morning Consult, and 29 percent admitted to having less than $500 in their emergency savings fund.
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That’s right, less than $500. Anyone who’s been to the supermarket lately – the price of a dozen eggs in January was up 70% from the same time last year – can guess one of the main reasons for that low savings rate. “People have been facing turbulent times,” said Meagan Dow, senior strategist at Edward Jones. “Understandably, inflation is forcing consumers to spend more on necessities, like housing and groceries, while market conditions are startling investors, so savings are falling low on the priority list.”
Then look to increase your savings over time, ideally at least annually or whenever you get a raise. “Many plans offer a feature to automatically i n c r e a s e your cont r ibut ions, making it easier than ever to boost your savings,” said Dow.
And if you’re working but don’t have access to an employer plan or have maxed out your contributions? You may be able to save in an IRA. For 2023, you can contribute up to $6,500 if you have taxable compensation, or $7,500 you’re age 50 or older. Although a Roth IRA has income limitations that may prevent you How to take control when so much seems out of our control? If, like from contributing the full amount, a backdoor Roth strategy allows you to most respondents, you measure “financial wellness” as being free of debt contribute to a Roth IRA even if you exceed those income limitations. A and worries over monthly bills, and having enough money to care for your financial advisor can help determine if this strategy makes sense for you. family, read on for ways to move forward: Pay down debt. Start with high-interest, non-deductible debt. The most Build three to six months’ worth of living expenses in savings to cover common form of this is credit card debt, but any high-interest debt is emergencies. Keep in mind that even a few hundred dollars can help likely to cost you more in interest than you can expect to earn on your improve your financial stability, so start small and celebrate your progress. investments. Take a look at the “Minimum Payment Warning” box on your statement to see how paying extra can save you in interest payments, and The specific amount to ultimately target depends on variables like whether significantly shorten how long it will take you to pay off your balance. your car is on its last leg, or your house is in an area prone to natural disasters. “There’s also your risk of temporary loss of income to consider, Then you can focus on paying down other debt, starting with the highest especially if you’re a single earner or have job insecurity,” said Dow. “The after-tax interest rate. “Target a debt-to-income ratio (DTI) of 35% or higher your risks, the more you’ll want to save.” lower if you have a mortgage, and 20% or lower if you don’t,” said Dow. To calculate your DTI, divide your monthly debt payments by your gross Save enough for your unique retirement needs. This year the average senior monthly income. can count on only $21,924 from Social Security, with the maximum benefit for those retiring in 2023 and claiming at age 70 being $54,660. Most people Interestingly, the survey also found that those who said they used a financial won’t want to solely rely on Social Security for their retirement income. advisor, instead of trying a do-it-yourself approach, were twice as likely to feel confident about their present and future financial situations. A trusted Which means, if at all possible, you’ll want to be saving money now. At local advisor at Edward Jones can help you create a roadmap to work toward a minimum, you should contribute enough to take full advantage of any your own financial wellness. employer match for a 401(k) or other employer plan. A match is essentially free money, and generally a 50% or 100% return on your contributions. -(NewsUSA)