Charles Schwab’s 2019 Wealth Survey (Why it’s scary and the importance of budgeting )

Charles Schwab just posted the results of the 2019 Modern Wealth Index Survey, which polled 1,000 Americans on their spending and saving habits. The results were interesting:

  • 59% of those surveyed said they live paycheck-to-paycheck
  • 44% of those surveyed carry a balance on their credit cards
  • 38% of those surveyed have an emergency fund
  • $500 was the average spent per month on “non-essentials” by those surveyed

The first bullet point is the most poignant. Out of 1,000 people surveyed, 590 of them live paycheck to paycheck. This means any interruption of pay (job loss, illness, etc) would result in a catastrophic financial situation. This has been a growing trend over the years as the younger working generation takes to part-time jobs, freelance work, gigs, and side hustles. This could also be the result of increased bills or financial obligations. For example, the average student loan payment is nearly $400/mo according to studentloanhero.com. This, combined with rent, utilities, groceries, and the like can begin to explain the living paycheck-to-paycheck.

However, it was the additional statistics regarding social media that made the Schwab survey really interesting (and scary!). It comes down to FOMO (Fear Of Missing Out) caused by social media envy.

Graphic from Charles Schwab Modern Wealth Index Survey

The survey specifically isolated results by the most recent generations: Millennials (generally those born 1981-1996) and Generation Z (those born 1995-2010). I’m in no way against the spending of money on experiences with friends, but I’ve also fallen victim to this lifestyle. I blame this very lifestyle for building up a backlog of credit card debt in my post-college years. The reason why I find the above numbers so scary is because of the long-term financial damage that is being done. When you combine a paycheck-to-paycheck lifestyle with spending to keep up on social media, it’s going to end poorly.

I always considered my credit card debt from partying and adventuring days my ‘past sins.’ The monthly credit card statements would always be a reminder of these sins, and the financial toll they took.

The Schwab survey wasn’t all bad news. In fact, this next part is quite encouraging. It also reinforces the importance of making a monthly budget and planning your finances. Dave Ramsey says it best: “Either tell your money what to do or you’ll wonder where it went.”

Graphic from Charles Schwab Modern Wealth Index Survey

The first line says it all. 78% of planners pay bills and save each month. By budgeting, they’re able to find the money necessary to meet their bill demands and still find extra to stash. Personally, my own financial adolescence took a big step forward when I started budgeting — and it happened by accident.

I used to groan at the idea of a budget. It sounded boring, tedious, laborious. I had a general idea of what I made and what bills I had…and that was good enough. My habits changed two Christmases ago, when I wanted to make sure I had enough money for presents. My earning and spending habits were pretty much on autopilot, and I was in the process of paying down my debt. But Christmas was coming, and I needed to make sure I had enough money for gifts. I decided to budget an amount for Christmas gifts that I needed to meet, and adjusted what I was spending elsewhere. This was my first budget.

Since then, I’ve budgeted every month — know what monthly bills there are, what annual bills (car insurance) were coming up — and it’s helped me ensure I have money to save and invest. It has also kept my credit cards on permanent hiatus, as they’re not needed to cover.

The Planners’ numbers from the Schwab survey say it all. Financially planning and making a budget makes a world of difference.

Do it. Try budgeting a month and include every single thing you pay for, including Netflix subscriptions and trips to Starbucks. Get an idea of what you spend a month and I bet you’ll find places to cut down spending. Then make a budget for a month and see if you can stick to it. It sounds tedious and the self-inspection can feel defeating, but it’s not all bad. Trust me!

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