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College Students and Recent Grads, News

More Than 40% of U.S. Adults Struggle to Make Ends Meet

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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You may be struggling to pay bills every month, but so are plenty of other people.

The Consumer Financial Protection Bureau on Tuesday reported that 43 percent of American adults struggle to make ends meet, based on the results of a national survey conducted in 2016 on the financial well-being of U.S. consumers.

About 34 percent of all consumers surveyed reported experiencing material hardships —  these include running out of food, not being able to afford a place to live or lacking the money to seek medical treatment — in the past year, the bureau said.  

In the survey, the bureau asked more than 6,000 participants from all walks of life to answer 10 questions about current and future financial security and freedom of choice, and to give a score from 0 to 100 on each question. The average consumer score was 54 in the survey. Not surprisingly, consumers surveyed said that their financial conditions were closely tied to their level of education, income and employment status, according to the bureau. 

Young adults are especially susceptible to financial hardships, the agency found. 

Millennials — those age 34 and below — reported an average score of 51 for their financial well-being, 10 points lower than seniors ages 65 and up and three points lower than the national average. 

The report, what the bureau calls “the first of its kind,” not only provides a view of the the overall state of financial conditions in the U.S., it also sheds light on how individuals from different demographics are faring financially. 

Adults with scores of 50 or below have a high likelihood — more than 50 percent — of struggling to pay bills and of experiencing difficult financial situations, according to the report. 

In contrast, those who reported scores of 61 and above had a much lower probability — less than 10 percent — that they would have trouble paying for basic needs.  

 Savings = stability  

Of all the factors examined, the bureau found that the amount of savings and financial cushions is the most important when it comes to disparities in people’s financial situations. 

The average financial well-being for adults with savings of less than $250 — the lowest level — is 41. That compares with 68 for people with the highest level of savings — $75,000 or more, according to the report. 

Similar differences in scores were seen with the ability to absorb unexpected expenses.  

“These findings highlight the importance of savings and other safety nets in helping people to feel financially secure, one of the basic elements of financial well-being,” the report said. 

Having some sort of financial knowledge appears to benefit financial well-being. 

The survey found that individuals with higher levels of financial confidence, knowledge and day-to-day money management behaviors tend to report better financial conditions. 

Apart from the survey, the bureau initiated an interactive online tool allowing consumers to measure their own financial well-being.  

 7 tips to improve your financial health: 

  1. Have “rainy day” cash available. Often, people who feel they are broke don’t have the means to absorb unexpected expenses. We’ve ranked the best options for when you need cash fast.  A good rule of thumb is to set aside at least three to six months’ worth of living expenses.  
  2. Save. Save. Save. It’s never too early to start saving for retirement. Financial planners often suggest you stash at least 10 percent of your income every month. 
  3. Focus on paying down high interest debts. Sometime it makes more sense to pay off debt than to save, especially if you have high-interest debt like credit cards.  Here are four fast ways to achieve that goal.
  4. Consider changing your lifestyle. Lifestyle inflation is the ultimate budget-killer — a widespread phenomenon that occurs when people spend more as their incomes increase.
  5. Learn to ignore the Joneses. Focusing on your needs and goals rather than aligning them with the people in your life or in your social media feed is critical to being happy with the state of your finances and your life.
  6. Come up with strategies to help break your negative spending habits. For example, we’ve written about a simple $20 rule that can help break your credit card addiction. Explore other ways to break bad money habits here.
  7. Educate yourself. The more you know about your finances, the better off you’ll be. It doesn’t have to be complicated. Simply using an app to track your spending or asking your HR department for a review of your retirement savings options are good places to start. The key is to engage in day-to-day money management and establish a habit of saving and budgeting. 

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Shen Lu
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Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at [email protected]

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Mortgage, News

We Downsized Our House So We Could Travel the World

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Purchase agreement for house

You’ve settled into your dream house and have called it home for years. But now you realize your family has more house than it actually needs, plus a large mortgage to match. Is it time to downsize?

The answer depends on what your financial and lifestyle goals are. Below, we share one story about a Florida-based family downsizing their home. Giving up 1,600 square feet allowed them to pay off their mortgage in a fraction of the time and achieve their goals of globe-trotting.

Keith and Nicole’s downsizing story

Keith and Nicole DeBickes loved their house in Delray Beach, Fla., but with more than 3,500 square feet of living space, it was perhaps larger than they actually needed at the time. “One day, I came to the realization that I had a 400-square-foot bathroom that I spent 20 minutes a day in, and we had this big formal dining room and formal living room that we never used,” Nicole said. “And we had a really big mortgage to cover it.”

She also wasn’t thrilled with the schools in the area — or with the idea of paying for private education. She and Keith knew they had to make a change.

The DeBickes (who work as an engineer manager and software engineer, respectively, and make between $100,000 and $200,000 combined annually) put their house on the market and started looking for a smaller home that was zoned for better schools.

They eventually settled on a 1,900-square-foot, four-bedroom house in Boca Raton. “We wanted to buy with the idea that we’d have a much smaller mortgage and we wouldn’t have to pay for private school,” Nicole said. “Then we could do things with our family like travel or retire earlier.”

The couple took out a 30-year mortgage for $110,000 in 2007, much smaller than what they had before. They then refinanced into a 15-year loan for $150,000 in 2009 to remodel their kitchen and upgrade their electrical work.

Pros and cons of downsizing your home

Deciding to downsize your house is a major decision that takes a good amount of effort and planning. Consider the following pros and cons before you choose to move forward.

Pros

  • Reduces your mortgage debt.
  • Potentially reduces other housing-related expenses, such as utilities.
  • Frees up cash to reduce or eliminate non-mortgage debt.
  • Gives you a smaller house to maintain.

Cons

  • Reduces your available square footage, giving you less space than you’re used to.
  • Unless you have enough equity to cover the purchase of your new home, you must qualify for a new mortgage.
  • You’ll have to sell your existing home.
  • You will have to shell out thousands of dollars for both your home sale and new home purchase.

Tips to pay off your mortgage more quickly

The DeBickes didn’t like the idea of having a mortgage on their downsized home. “We didn’t want to be working every month for a mortgage,” Nicole said. “We don’t like debt, and we wanted it to be gone.”

The couple buckled down and started making double and triple payments every month on their home loan. They drove older cars, carpooled to save on gas and maintenance and packed lunches to cut down on their food costs. The family took relatively modest vacations, staying with family or driving to the west coast of Florida.

All their diligence paid off — the DeBickles submitted their last mortgage payment in fall 2013.

If you’re on a mission to be mortgage-free sooner rather than later, here are tips to help you get there:

  • Make extra principal payments each month. Try rounding up your monthly mortgage payment. For example, if your payment is $1,325 every month, pay $1,400 instead or increase the amount by even more, if your budget allows. Be sure to communicate to your lender that you want the extra payments applied to your principal balance and not your interest.
  • Pay biweekly instead of monthly. Split your monthly mortgage payment into biweekly payments. Since there are 52 weeks in a year, you would make 26 half payments, or 13 full payments. Making one extra full payment each year could allow you to shave a few years off your mortgage term.
  • Consider recasting your mortgage. If you have at least $5,000 or $10,000 — depending on your lender’s requirements — you could use that lump sum to recast your mortgage. A mortgage recast allows you to lower your monthly payments by paying your lender a set amount of money to reduce your mortgage principal.
  • Dedicate windfalls to paying down your principal. Every time you get a tax refund, bonus or some other windfall, use it to pay down your outstanding loan balance.

Achieving financial freedom

Although they’re now mortgage-free, the DeBickes were still putting money away like crazy. They eventually quit their jobs (temporarily) and traveled abroad for two years with their boys, who were 10 and 7 in 2015. Without a mortgage payment, they were able to amass the $190,000 they thought they needed to travel for 28 months. “We have been living on one salary and saving or paying off the house with the other for 12 years,” Nicole said.

Despite their hefty savings goals, they’ve been able to take the boys to Europe and Costa Rica, too. “We want to really get them prepared for what travel is going to be like,” Nicole said.

The trip, which is outlined on the family’s website, FamilyWithLatitude.com, took the foursome everywhere from Ireland to France, among other spots. Nicole and Keith “road schooled” their children as they traveled, with the help of Florida’s virtual school program that allows them to take classes online.

They planned to rent their home while they were away, which will help finance part of the trip and cover some house expenses, such as insurance and property taxes. In the meantime, they are maxing out their 401(k)s and taking care of college funds for the boys.

“(In 2014) we were able to purchase the prepaid college plan for my youngest son in a lump sum,” said Nicole, who had already done the same thing for her eldest. “So I know that both boys have good college funds to take care of them.”

The bottom line

If you’re looking to move into a smaller home and save money in the process, it might make sense for you to downsize. Just be sure you’re clear on the benefits and drawbacks, and how the choice to cut down your square footage would align with your personal goals.

In the end, the lack of debt will allow the DeBickes the freedom to not only to travel the globe, but to hang out with the important people in their lives.

“With both of us working, we haven’t been able to spend as much time with the kids as we wanted,” Nicole said. “It’s a real luxury that we can do this. I’m looking forward to spending time together as a family.”

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kate Ashford
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Kate Ashford is a writer at MagnifyMoney. You can email Kate at [email protected]

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News

Study: Millennials Depend on the Bank of Mom and Dad

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Millennials are advancing steadily into middle age. But statistically speaking, America’s largest generation retains one characteristic of their youth: Widespread dependence on their parents to help pay the bills.

A new survey reveals that even millennials who think of themselves as independent on money matters still hit up their parents for regular, recurring expenses. Of those surveyed, 54% claimed they stood on their own two feet, but when pressed a further 30% of those admitted to leaning on their parents to help cover costs on everything from groceries to car insurance.

The costs being covered by parents

For the most part, millennials aren’t hitting up their parents for cash to cover extravagant, one-off charges like airfare for an Instagram-worthy vacation. Instead, the survey found millennials ask mom and dad for help making ends meet for living expenses, such as the phone bill, food and rent. For example, of the millennials who receive monthly help from their parents, 48% of respondents say the money helps cover the phone bill. A more detailed breakdown can be seen in the graph below:


Besides these day-to-day costs, emergency spending requires a call home for some millennials. About 15% of all survey respondents said they would need help from their parents to cover a sudden $1,000 expense. Instead, most would opt to use either cash or savings, provided those savings weren’t earmarked for retirement in a tax-advantaged account.

Millennial money worries

Dipping into your emergency fund to repair a hole in the ceiling is a good strategy (and a reason why you save), while making a withdrawal from your savings account to pay for a bottle of rosé is not. Unfortunately a staggering 70% of millennials surveyed admitted to using savings to cover non-emergency expenses.


To use a favorite phrase of millennials, “this is problematic.” A savings account can only be drawn upon six times a month via debit card or check (due to federal regulations) and you don’t want to waste one of your six free withdrawals to pay for a pint of Americone Dream. Even worse, the money spent on non-emergency expenses won’t be there when you need it to pay for an unexpected, urgent cost.

Another metric of financial health where millennials could stand to improve is retirement savings. While 58% of the millennials surveyed claimed to save money with either each paycheck or once a month, 44% don’t have any sort of retirement savings account — either a private one or through work.


To be fair, millennials aren’t exactly celebrating these personal finance failures. Approximately 57% said they regretted how they’ve spent money from their savings account, and a little over 36% said that during the past week, they felt anxiety about their finances every single day.

The numbers behind the stress

A significant financial worry on millennials’ minds is not having enough money. While we’re pretty sure everyone, regardless of age, would like to have more money, a recent study by the Federal Reserve underscores that millennials are particularly hard-strapped for cash.

Titled “Are Millennials Different?”, the report found when compared to members of Generation X and Baby Boomers when they were roughly the same age as today’s millennials, the millennials have less means to deal with their financial challenges.

As the authors of the report put it in the conclusion of the report, “We showed that millennials do have lower real incomes than members of earlier generations when they were at similar ages, and millennials also appear to have accumulated fewer assets. The comparisons for debt are somewhat mixed, but it seems fair to conclude that millennials have levels of real debt that are about the same as those of members of Generation X when they were young and more than those of the baby boomers.”

How can millennials do better?

Besides winning the lottery, what else can millennials do to improve their financial situation and rely less on their parents?

“Many millennials are skeptical of the market,” said Dallen Haws, a financial planner based in Arizona. “Although it’s good that they are not investing willy-nilly, it will be very important that they get comfortable with investing to be able to reach their full financial potential.” Read more on how millennials (and everyone else) can start investing with an eye toward retirement.

Millennials should also embrace the power of austerity. That doesn’t mean living like a monk, but it does mean thinking twice (or thrice) about making big-ticket purchases and whether or not they are affordable.

“Without question, the biggest regret amongst millennials I work with is overpaying for a car,” said Rick Vazza, a CFA/CFP based in San Diego. “Some of my most successful young members have happily continued holding on to inexpensive cars allowing them to funnel more money toward travel, retirement funds or a down payment.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here

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