Did you know that the average American household carries $137,063 in debt? That average is up from $50,971 per household in 2000, which means, in the past 19 years, household debt has more than doubled. In fact, it has increased 2.69 times. While the median household income has also increased since 2000, it has only increased about $20,000, bringing the current median household income to $61,937. That means while the debt has increased 2.69 times, the income has only increased 1.48 times.
Because the average debt has increased so dramatically, with a less than comparable increase in the income, the average debt to income ratio in U.S. households is way out of control! Americans simply can't keep up. We continue to live beyond our means, blaming the stagnation in wages for our inability to 'get ahead' and using the normalcy of debt to justify buying the perfect house and the perfect car. Meanwhile, we're fighting with our spouse and failing to save for retirement because we're living paycheck to paycheck, feeling as if we're constantly falling short of our financial goals.
An article on Investopedia explained, "While Americans rank fourth in household wages worldwide, they rank 25th in median wealth." Wealth is defined as combined income, investments, and personal assets. The article goes on to explain, "This disparity is largely due to the fact that Americans rely on credit more than individuals from other countries." In fact, only 23% of Americans are living life debt free.
Ann Wilson, the author of 'The Wealth Chef,' was quoted saying:
"Getting out and staying out of debt is key. Debt is the biggest barrier, a parasite to wealth."
A parasite to wealth.
That phrase has really stuck with me. And I believe it couldn't be more accurate. We have been sucked into this culture of debt. Our society has normalized debt to the point that 77% of our population is in debt and the average household debt is more than two times the median household income. Every month, we pay an exorbitant amount on our debt, (if you don't believe me, read my blog post from last week) and we're left feeling like we aren't making progress on our financial goals.
Have you looked at the average retirement savings lately? Probably not. I think it's only nerdy people like my husband who do that. ;) Well, if you had, you'd be greeted by some somber news. The average retirement savings of Americans in their sixties (you know, the people who are 'ready' to retire) is $172,000. What in the world?!?! $172,000?? That's NOT what they need for retirement. In fact, it's not even close!
Yet every month, we diligently pay, pay, pay our bills. We allow this parasite to eat away at our hard-earned cash. And we neglect to pay ourselves. We don't save for retirement. We don't save to cash flow our dreams. And it's not because we can't. Trust me, you can save. Rather, we don't save because our priorities are upsidedown. Warren Buffet once said, "Do not save what is left after spending, but spend what is left after saving."
It's time you get rid of your parasites.
It's time you start cash flowing your dreams.
It's time you take control of your biggest wealth-building tool - your income.
I know, you've lived with this parasite for so long that you really don't even notice it's there. It causes you discomfort - the financial stress, strain on relationships, worry, lack of sleep, financial emergencies - but you've chalked that up to just being a normal part of life. I mean, everyone has this parasite, right?
Now, there's no pill you can simply take to painlessly rid yourself of this parasite. But, thankfully, there are a few steps you can take that I promise will get rid of this parasite and get you well on your way to cash flowing your financial dreams.
(1) Get on a budget.
The first step in getting rid of this parasite is getting a budget in place and sticking to it. A budget is the best way to increase your income without actually increasing your salary. In fact, most clients I coach who make a budget for the first time find at least $1,000 that was just disappearing every month. Are you feeling unsure about how to get started budgeting? Check out the Resources page of our website to watch our video on budgeting and download our free budget template.
(2) Pay off your debt fast.
The best method for paying off your debt (and doing it fast) is the Debt Snowball principle. If you're not sure why I'm talking about snowballs and debt in the same sentence, then read last week's blog post and check out the Resources page of our website for more information.
(3) Increase your cash flow.
Are you serious about getting rid of this parasite? Then start finding every opportunity to trim your lifestyle and increase your income. The cash you free up can be used to pay off your debt even faster! Not sure where to start with trimming your lifestyle? Grab a copy of our book, Twenty Three and Debt Free. We walk through 50 practical tips that we put into place in our own lives, allowing us to live on just a fraction of our income.
(4) Quit worrying about what everyone else thinks.
Contentment is huge!!! Practice gratefulness and contentment. Quit comparing your life to everyone else's lives. Thank God for all that He has provided, and remember that less is often more.
This isn't a tricky formula. It doesn't require formal training to implement these practices in your life. But, this formula isn't a magic pill either. It does require hard work, determination, and the confidence to go against what society says is "normal." (Trust me, your friends and family will likely think you're crazy.)
Once you have gotten rid of this parasite, you will be so ready to build your wealth! Instead of continuing to pay, pay, pay on your debt every month, you will be able to save, save, save for your retirement, your kids' schooling, your dream vacation, your giving fund, and so much more. And you will likely be amazed how quickly your wealth will build. So, quit being the host to this parasite. Pay off your debt, rid yourself of this parasite and of all its negative effects on your life, and start building your wealth.