Speaker 1: What is up guys and welcome back to the channel. If you're new to the channel, my name is Dave Wallace and I'm here to help you win with money so you can build your wealth. Inflation, economic instability, and a lack of savings have an increasing number of Americans feeling financially stressed. According to a recent survey by CNBC, 70% of Americans feel financially stressed. In this video, I present the factors creating financial stress for Americans as well as the steps that you can take today to de-stress your financial life. A certain amount of anxiety and uncertainty are normal when it comes to financial life given just the normal complexities that come along with managing finances. Anxious and uncertain about what's going to happen in the economy. Some folks may not know how to create a budget. Some folks may just be confused about where to stash their cash to avoid it being consumed by inflation. Others may be just wondering where to save for retirement or may be wondering how to get started if they are getting started late. Stay tuned to the end where I present four foolproof steps to de-stress your financial life. If you haven't already, consider adding me on Instagram. My posts are pretty much daily. Let's get into the video. What factors are contributing to the increased stress levels for Americans right now? Higher expenses. Nearly 60% of respondents cited inflation being the top reason that is causing financial stress with the second reason being economic uncertainty just with various instability being out there throughout America. Growing economic uncertainty. The recent failures of Silicon Valley Bank and Signature Bank are key drivers of uncertainty in the market for consumers. When banks start to fail, naturally there is some level of uncertainty that follows for consumers in terms of the stability of markets. That really gets called into question any time banks start failing. Only 13% of respondents said that they were confident in America's banking system. About a third of the survey respondents said that bank failures made them more concerned about economic uncertainty whereas 42% of respondents said that the bank failures made them only somewhat more concerned moving forward. And the third key driver of financial uncertainty is the increasing cost of debt. The survey found that 58% of Americans are living paycheck to paycheck. This is actually backed up by several other surveys that we have seen done already in 2023 that shows that roughly half to around 70% of Americans report going paycheck to paycheck. There is a common misconception out there that this is for individuals in lower income categories, but that is not the case. This survey and the other surveys that we have seen shows that this is not an income contingent problem. This is actually impacting folks with higher incomes as well with roughly half of folks with higher incomes earning over $100K reporting going paycheck to paycheck as well. Meanwhile, one quarter of the respondents mentioned credit card debt being a significant driver of financial stress. Also delinquencies are on the rise with more borrowers going delinquent with total debt hitting $38 trillion in February of 2023. There was some good news that came out of this survey. In the survey, about a quarter of respondents said that if they had an extra $10,000 laying around, they would invest it in a mixture of stocks, bonds, and mutual funds. Well played America. Well played. Gotta love Americans investing extra money. That is where true wealth is made. What can you do to de-stress your financial life during uncertain times? Let's list out four steps that you can take to de-stress your financial life and secure your financial future during uncertain times. Number one, start an emergency fund and start budgeting. These things are cornerstones to any financial plan. The budget is going to make sure that you are maximizing not only your earnings, but also that you are maximizing your expenses and getting the most out of every dollar that is coming through your household. While the emergency fund is going to give you peace of mind with inflation continuing to run rampant, with the cost of goods continuing to go up, with economic uncertainty continuing to be out there, with the Fed fighting inflation, raising interest rates, the emergency fund is going to give you peace of mind, which will go a long way to de-stress your financial life until we get back into more of a bull market where things are moving up on a more steady basis and a little less chaotic. The emergency fund can give you peace of mind that will go a long way to settle your financial life down. Next up, max out your retirement contributions to capture your full employer match if it is available to you. You might be wondering, why do I say that before paying off debt? Every dollar invested at the age of 20 turns into on average $88 by retirement age of 60. Therefore, the return for a free employer match is well over 100%. No interest rate on debt can come close to matching a more than 100% rate of return on an employer match. So you want to capture that as quickly as possible because that free money will do more to help you build wealth than any high interest rate debt can do to destroy your ability to build wealth. So that's why we have that in the second spot. So capture that employer match. That will go a long way to build wealth over time. Number three, pay down or better yet, pay off your debt using the debt avalanche. Debt is a huge driver of stress. All of the studies show debt being a core driver of stress and it's totally understandable. Having balances out there is stressful, especially when the Fed is raising interest rates and the interest rates are going up regularly and the cost of that debt is going up regularly. So by paying down or better yet, paying off that debt, that will go a long way to reduce the stress in your financial life. The debt avalanche is the cheapest and fastest way to pay off your debt. It's super simple to do it. You just list out your debts in order of highest to lowest interest rate, pay off the first debt in order of, again, of highest to lowest interest rate, and then once you've paid that debt off, go ahead and move to the next one until all of them are gone, keeping in mind you want to be paying at least the minimum payments on all of your debt while you are tackling the debt as you go. That is a key. You don't want to hurt your credit as you're going through this process. So make sure you're paying those minimum payments if you can. And then number four, go ahead and invest over 20% of your annual income to build wealth. No amount of emergency funds or savings are going to build wealth at a rate that is going to offset inflation and rising prices in a bear market. The only way to do that is to invest your way to building wealth. One of the common misconceptions that I see as a financial coach is folks that just want to save, save, save. The challenge with that is that savings should be there to cover emergencies and sinking funds, so meaning things that are truly emergencies, medical emergencies, household emergencies, family emergencies, and then planned vacations, planned insurance premiums, planned health care premiums, things like that. Keep in mind, if they're in a savings account, the money is being eaten up due to inflation because the average annual interest rate right now on a high yield savings account is 4%. If they're in a regular savings account, they're likely significantly lower than that, whereas the average rate of inflation is still hovering around 7% to 8%, so that money is losing its value very quickly to inflation. So again, the money has to be invested. There's no reason to have more than is prudent set aside in an emergency fund. It is just as wasteful to have too much money in an emergency fund as it is silly to not have an emergency fund at all, so make sure that you have a good balance there. Typically, I advise clients to have three months if they have a steady career, meaning that they've been in the same type of a job for roughly two years. For self-employed folks or folks who have a less stable career, I would go more like a six-month type of an emergency fund, but when you get beyond that, you're really getting into a point to where you're probably saving more than it is worth. Make sure that you're investing that money. Again, every dollar turns into $88 on average when invested in the stock market. So that is the true way to build wealth, and by building wealth, the offset in income increases due to compounding interest is the best way to hedge against all of the economic uncertainty that is out there in the market today. The increases in inflation, the increases in interest rates, the best way to offset that is by earning the most amount of interest and income on your money, and the best way to do that is through investing it. You may be saying, well Dave, the stock market is unstable. Over history, the stock market, the S&P 500 has returned over 2,000%. If your time horizon is more than 10 years, then I would be less concerned about the returns in the stock market and look at down markets as an opportunity to buy at a discount. If you went to your favorite store and a significant purchase was on sale of 10, 20%, most people would be quick to jump on that sale. Look at the stock market the same way. If it's on sale 20%, be about buying. Time in the market beats timing the market. Lower cost average your way, get in, buy, buy, buy. Be more consistent about controlling what you can control, which is making the contributions. Index funds are typically well balanced and usually have great returns, usually around 8% over time. So again, if you've got a long enough time horizon, then be more focused on the contributions and less focused on buying low and selling high and you're going to be just fine to build wealth even through a down market. When it comes to your financial future, it's about controlling what you can control. The uncontrollables in financial life are not going to make or break you. Sure, they may make things more stressful, I completely get that, but I want to make sure that we are sending a message of hope and control here because your financial future is in your hands 100%. The government, the stock market, the things that you do not control are not going to determine whether you build wealth. What do you give the odds of a major recession happening in the next 12 to 24 months? And if it does, how severe do you think that the recession will be? Drop it in the comments below. If you found value in today's video, make sure to smash that like button, hit the subscribe for all the tips, tricks, and motivation to win in financial life. Until next time.