Consumer Debt

More than 2,500 U.S. adults said in a new Bankrate survey that they would need to earn, on average, $233,000 a year to feel financially secure and $483,000 annually to feel rich or to attain financial freedom, CNN Business reported. For comparison, the median earnings for a full-time, year-round worker in 2021 was $56,473, according to the U.S. Census Bureau. Of course, there is no objective or “right” answer to these questions. What it takes for one person to feel financially comfortable can depend a lot on their early childhood experiences with money, how much they perceive those around them to have, their current financial situation, the cost of living in their area and, if they’ve thought about it, what is most important to them in life. Plus, a big income isn’t necessarily a guarantee of financial security if you’re living paycheck to paycheck, not saving much and carrying big debts. The same goes if you’re feeling insecure about your economic prospects. In Bankrate’s survey 72% of respondents said that they did not currently feel financially secure, although 46% said they expect to someday. The reasons cited for not feeling secure today included high inflation (63%); the economic environment (48%); insufficient emergency savings (42%); insufficient retirement savings (41%); rising interest rates (36%); low pay or low career mobility (33%); high debt (26%); and housing affordability (25%).

While Americans had built up savings at an unprecedented rate following the pandemic, households are struggling to put money away this year — a trend that has fueled fears among economists of an incoming recession, Newsweek reported. During the COVID-19 health emergency, people's personal savings thrived, with people saving as much as 30 percent of their monthly income and having $2.3 trillion in excess savings between 2020 and 2021, according to the Federal Reserve. Three years later, the rate of savings among American households is rapidly falling. In February, the U.S. personal savings rate was estimated to be around 4.6 percent — much below the decades-long average of about 8.9 percent, according to the Bureau of Economic Analysis. Some economists think that the collapse of household savings could lead to a spending slowdown and trigger a recession. Consumer spending currently represents about 70 percent of the U.S. GDP. Up until now, the recent growth of inflation and the Federal Reserve's attempts to curtail it by raising the bank's key interest rate in 2022 and this year have not curbed household spending by as much as expected. Americans had a lot of savings accumulated during the years of the health emergency they could burn through. Now, these savings are starting to dry up, as inflation remains relatively high at 4.05 percent in May despite having cooled down compared to its peak of 9.1 percent in June last year. On top of that, wages haven't grown much at all in recent years, staying much behind inflation, but it's not only inflation contributing to putting more economic pressure on Americans.