3 Reasons Americans are Worried About Money in 2021
by The Cash Queen | June 1, 2021
With Covid cases dropping and the job market strengthening, it seems that Americans are financially starting to see the light of day. Even with positive forecasts, Americans are still feeling a little shaky about their financial future. Here are some of their concerns and how to address them.
- Running out of money
Going into 2021, Americans seem to be concerned about running out of money due to rising costs of products. This concern is justified. In 2021, costs on most consumer goods have risen, fueled by price inflation and low inventories. During the pandemic, less people worked, which decreased inventories. Stimulus money helped fatten wallets that were eager to spend once restrictions were lifted. The surge of money coupled with low inventories has caused an effect that is wreaking havoc on supply and demand. According to the National Association of Home Builders, a lumber shortage has added an additional $24,000 to the average cost of a new home. There are a few things you can do to help balance out some rising costs. Use stimulus money to pad savings. Eat in more often. Take walks instead of trips to the museum or paid entertainment. This will help take some of the edge off the fear of running out of money.
- Not enough retirement
One of the greatest fears Americans have is not having enough money saved for retirement. Covid has increased those fears. We have seen prices skyrocket, which puts an added unknown to the financial future of most people. By your mid 60’s, you should have at least 10 times your income saved. For example, if you make $50,000 a year, you should have about $500,000 in savings by the age of 65. It is never too early to be proactive in planning for retirement. Start out by writing a retirement strategy. There are many factors that should be included in your plan: income, savings, inflation, age of longevity, and long-term care are a few. The time to start planning is now.
- Debt-to-income ratio
With such low interest rates, Americans are snapping up homes in 2021, putting the housing market in a shortage that has not been seen in decades. Being in the rental business, the biggest concern my tenants have before purchasing a home is their debt. Before a home can be purchased by a potential buyer, lenders first look at something called debt-to-income ratio. This helps the lender understand if the buyer has the means to make the payment on the home. In simple terms, it is how much debt you have relative to your income. If you reduce your debt load, this will help increase your credit score and lower your debt ratio. Chipping away at credit card balances is one way to help reduce this debt-to-income ratio. Take control of your non-essential spending. Small changes to your spending habits will make a huge impact on your debt-to-income ratio.
What should you do with your cash until things get better?
In times like these, it is best to create a budget and stick to it. Put aside extra money for an emergency and learn an extra skill for a side hustle. Use the side hustle money for small investments. Stocks, gold, and silver are all within reach of the small investor. Plan on holding them for long term if that is the avenue you choose to go.
ABOUT THE AUTHOR
Tracie Breaux is a personal finance writer. She is the founder of The Cash Queen and she’s passionate about empowering women to achieve financial independence.