2 Frightening Financial Facts

It’s easy to get scared with a lot of things. But, nothing is more frightening than knowing some real facts about many people’s finances. Here are some of them:

15 and 25 percent

Credit cards are very convenient. But, they can be very deadly at the same time. They can attack your financial future without you noticing it. On the average, most cards charge an interest rate of 15%. But, for those with bad credit, the interest is as high as 25%. This means that if your borrow $5,000 at 15% interest, paying this amount in minimum will take you 145 months to pay it in full. At this rate, your total interest payment will amount to $3,000. In order to avoid this, try your best to pay off your credit card balances as soon as possible.

Below $1,000

The 2011 Retirement Confidence Survey shows that 67% of Americans have not saved at least $50,000 for retirement. The worst part, 29% of these people has not even spared at least $1000! If you have already allocated $50,000 for your retirement at present, you may feel that it is already enough. However, it actually isn’t. According to the retirement calculator of Bloomberg, if you are 45 years old and you want to spare $1 million for your retirement, you have to save around $17,000 every year until you reach 65 years old.

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But, most people will even agree that a million dollars worth of savings is not sufficient. If you want to secure your retirement, it would be wise for you to act as soon as possible. Save more than what you usually keep. Invest properly. Take full advantage of retirement accounts like IRAs and 401Ks most especially if your employer gives matching funds. Think of working more years and cutting lifestyle costs. Also, consider working on a part time basis even if you are already retired.

Increasing Student Loan Debt Pose a Huge Burden

College tuition fees are costly and difficult to afford. Because of this, students have an additional burden to carry aside from the classes they take and finishing school.
The amount of debt from student loans is now greater than the total debt from credit cards in the entire United States. This means that before even graduating, students have already created a hole and a burden in their finances.

According to the associate professorof Ohio University, Deborah Thorne, the problem is partly due to the bad economic condition.

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She said that when the economy goes down, more people go back to college hoping that they will have better work opportunities. Consequently, an increasing number of people go back to school. However, more than this, the bigger aspect that contributes to the problem is the unaffordable tuition rates that are not proportionate to the income.

She said that around 30 years ago, tuition costs were less than $200 every quarter. During that time, the parents of college students can work over the summer and can already afford to pay for their child’s education.
However, the situation is different today since there are students who need to go back to their homes since they cannot find work. Huge student loans are also causing other setbacks as well.

Thorne says that high debts in student loans can affect people during their entire lifetime. It will lead them to postpone their plan to have a family or purchase a home. They will also be forced to decrease the amount they contribute to their retirement account. Some may not even be able to send their kids to college since they were not able to save enough money to settle their personal student loan.
Thorne added that the average debt in student loans is about $25,000.

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