How confident are you in your financial future? Primerica surveyed 1,000 middle-income Americans and found that many of them are anxious about their long-term financial security. Despite those worries, many families are not taking steps to secure their financial future. Nearly two-thirds of respondents acknowledge making at least one bad financial mistake, with an average loss of more than $27,000. Glenn Williams, chief executive officer of Primerica shared some of the money missteps of middle-income Americans:
Not making more than the minimum payment on credit cards
The Primerica survey found that one in three middle-income Americans say credit card debt is their biggest financial concern. Williams says many families use credit cards to supplement their income. Because money is tight, they focus on just making the minimum payment. That is a big mistake.
“Of course, that stretches out the payment time and the cost of that debt,” he says. “We really encourage people to minimize the use of their credit cards. If they do use credit cards, make sure they come close to making the full payment each month and keep a balance off of that credit card.”
If you have accumulated a balance over time? Williams suggests coming up with a game plan to systematically pay off that debt and get it down to zero as quickly as possible.
Not having more than $50,000 in life insurance coverage
Williams says $50,000 in life insurance coverage is a minimal standard of income protection and not very much at all. He says most families don't realize they need more and can purchase inexpensive term life insurance relatively cheaply.
“It’s just a matter of understanding what they need to do,” Williams says. “What type of coverage? What amount of coverage? Ten times of the breadwinner’s income is what is needed to replace the income in the event of death.”
Not having money Invested in accounts outside of traditional savings
Savings accounts are bank accounts where you can store and grow your money. Williams says some families mistakenly believe they don’t have enough money to invest outside of savings accounts. He suggests investing in mutual funds. You can get started for as little as $25 month.
“Over time as their financial conditions improve, they can increase the amount they invest regularly,” Williams says. “They should start something and do it outside of the traditional savings account that has very low returns.”
Not having enough savings for at least three months of expenses
Putting aside three to six months of expenses in an emergency fund can be the hardest task for families. Williams says mom and dad are often so overwhelmed by their finances that they don’t even try to save money for a rainy day. He says that often leads to them using credit cards for emergencies.
So what’s the best way to go about saving?
“If you can set aside a fixed percentage or a fixed amount to start building that emergency fund, that’s a great way to begin,” Williams says. “You may take two steps forward and one step back. You may start building the emergency fund and then have an emergency, but at least you didn’t put it on your credit card. Already you’ve made progress if you’ve started eliminating the use of credit cards and the building of that debt.”
Not saving enough for retirement
The Primerica survey found just one in four Americans feel comfortable determining how much they need to save for retirement on their own. If you are worried about how to set yourself up for the future, Williams suggests reaching out to a financial professional.
“I would encourage people to get some outside perspective,” he says. “Find out how to have a personalized strategy to get to where you would like to go. Families enjoy having someone talk them through that. Someone who can give them examples of other families that have dealt with that successfully or maybe made mistakes that they can watch. When confidence increases, action increases from our experience.”