There is a hidden financial crisis looming and I think it will dwarf the tech bubble collapse and the mortgage crisis and the coming student loan crisis.
Truth is, it’s been coming for a long time.
Most Americans are spending far more than they should and sadly, as a result, they are not saving. In the end, this is going to cause a reduction in public consumption and a lot of pain and suffering.
If you think I am being pessimistic, a quick Google search will reveal that most Americans have less than a thousand dollars in their savings account. Of course, your data source will affect the numbers a bit but, here are some representative findings:
- A recent survey by GoBanking found 69% of Americans have less than a thousand dollars in a savings account. 34% don’t even have a savings account!
- 29% of Baby Boomers (aged 55 to 64) have no money in their savings accounts
- There is a collective retirement savings gap among all ages from 25 to 64 is between $6.8 and $14 trillion dollars, depending on how it is measured.
- Total outstanding student debt is another one trillion dollars
- Auto loan delinquencies were 3.6% as of the end of Q3 according to the Fed. 6 million people are over 90 days past due on their car loans.
Yet, I see people who have things that I know they can’t afford. Big ticket SUV’s, all sorts of big-ticket toys, expensive vacations, activities for their kids. All paid for with their future.
It is clear that these people are not saving 10-15% of their income for their retirement. And, I doubt they will be prepared for their kids college expenses.
But they keep spending.
We have been brought up to believe it is okay to spend and it is our patriotic duty to the economy to spend.
But it really isn’t. They lied to us.
If the people in the statistics above don’t make changes, fundamental changes, to their lifestyle, they face the real prospect of never being able to retire and that is the best scenario. It assumes they don’t succumb to some kind of financial catastrophe which could very well leave them bankrupt.
And they won’t be the only ones to suffer as the economy will face challenges adapting to something other than a consumption driven model.
Sooner or later, we all must face the fact that “stuff” isn’t the answer, it is the problem.