Ask Brianna: How Do My Finances Match up against My Peers’?


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“Ask Brianna” is a column from NerdWallet for 20-somethings or other people getting started. I’m here that will help you manage your hard earned money, find a job and repay student education loans – all the real-world stuff no one taught us how to do attending college. Send the questions you have about postgrad life to [email protected].

This week’s question:

It appears like I’m falling behind my friends financially. They take nicer vacations and drive more costly cars than mine. How am I really doing in contrast to others how old irrrve become?

It happens every morning, from Wichita to Washington: We wake up feeling good. We get our phones and scroll through Instagram.

We guess at the carat weight of a college friend’s diamond engagement ring and marvel in a cousin’s shiny new truck. We’re lifted into tornadoes of jealousy over photos of the friend’s puppy. We puzzle over the way they afford it.

But this social media highlight reel leaves a great deal out.

“You don’t find people posting about missing a rent payment,” says Doug Amis, a certified financial planner and president at Cardinal Retirement Planning, Inc. in Cary, New york.

Know where you really stand

If you’re under 35, here’s the way your peers are actually doing, based on the Federal Reserve Board’s Survey of Consumer Finances:

The median income for families with a head of household under 35 was $40,500 in 2016. Nearly half of households under 35 had charge card balances, with median debt of $1,400 per family. About 42% of families under 35 had retirement accounts, and their median value was $12,300.

Lastly, about 45% of households with a head of household under 35 had education debt. The median amount was $18,500 per family, however the amount varies widely by income level and highest degree attained.

Follow guidelines, not Instagram

You won’t look for a real response to how you’re doing inside a Fed survey or a social media feed.

You will find it by measuring yourself against guidelines, refined over decades and endorsed by financial pros, that point the way in which toward true financial health. Begin with these:

  • Do you have an emergency fund of at least $500? It ought to eventually include three to six months of basic expenses.
  • Are you paying down high-interest debt, like credit cards and personal loans? That should come before attacking lower-interest debt like student education loans.
  • Do spent under you get? A budget based on the 50/30/20 rule might help: You’ll spend a maximum of 50% of after-tax income on necessities, a maximum of 30% on wants and at least 20% on savings and debt repayment.
  • Do you follow the 28/36 rule? Lenders use this to qualify you for any mortgage, but Amis suggests it’s also a helpful method to assess income if you are years from buying a home. Housing costs should be less than 28% of the pretax income. With other debt payments, like credit card, car or student loan bills, the total may come under 36% of pretax income.
  • Do it will save you for retirement? Socking away 10% to 15% of the pretax earnings are the goal.
  • These guidelines are aspirational. But your progress toward them is the perfect measure of whether your money is on your side than surveys or Instagram. In the end, your financial well-being comes down to whether you can meet your basic needs today, plan for a better tomorrow and revel in life along the way.

Set your own goals

While these best-case scenarios might not seem feasible at this time, don’t wait to begin saving before you can set aside the amount you feel you’re supposed to, says Emily Guy Birken, author of “End Financial Stress Now.” For instance, save even 1% of your income for retirement if that is all you are able afford. Increase the amount by 1% twice yearly as you become accustomed to having less in your paycheck – or at best if you get a raise.

And most importantly, set your own goals – when to purchase a house, say, or how quickly to pay off student education loans – based on what you value most. While some friends might take fancy vacations, they may also have massive credit card debt you do not know about.

Besides, Birken says, “Would you really choose to have all of the problems, and also have all their foibles, flaws and issues, simply because they have something you don’t have?”

This article was written by NerdWallet and was originally published by The Associated Press.?