George Kamel - 3 Signs You’re Above Average (These Money Stats Are UNREAL)

Episode Date: May 5, 2023

George Kamel is a personal finance expert and co-host of The Ramsey Show. Following Ramsey’s proven money plan, George went from negative net worth to a millionaire in under 10 years. His goal is to help people spend less, save more, and avoid money traps so they can live a life with more margin, options and freedom. Start Your EveryDollar Budget Now! Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

Most of us are average at almost everything in life. And Susan, I know your mom said you were a great singer, but karaoke night doesn't count as a gig. I wanted to be the next American Idol. Thanks, Sarah. And Brad, being the best player on your recreational pickleball league still makes you the best player on your recreational pickleball league. But hey, being average at most things is nothing to be ashamed of.

It's no biggie. Average keeps us humble, relatable, helps us appreciate true excellence out there. Take Jif Palm, for example. He's the most famous animal in the world with over 30 million followers across social. My dogs are not the next JifPOM. They need their butts wipe for goodness sake. Okay.

With that being said, there is one type of average out there that you should never settle for, and that's being financially average. There's just no excuse for being average with money, regardless of your intellect, your beauty, or your talents. So today we're going to cover three signs that you're above average with money. Now, what's wrong with being average with money? Well, it leads to a below average life filled with stress and stress. anxiety. Over half of our fellow citizens worry every single day about their finances and

they feel stuck in a cycle where they can't get ahead. Think about it this way. One out of every two people walking into Hot Topic is experiencing inner turmoil over affording that studded belt. This is no way to live people. If you're going to regret a purchase, I want it to be because you made a major self-image mistake, not a major money mistake. So let's see how well you stack up against the average out there using these three signs. But before we start stacking, let's take a a brief intermission to tap that like button and hit the subscribe button. It would mean the world to me. I need this job.

Please. Just do it. So the first sign that you're above average financially, you don't live paycheck to paycheck. Now what does that mean? Paycheck to paycheck means there's no money left over after you pay the bills. There's no margin and you'd be screwed if one paycheck didn't show up. Just like the time your Bumble Day didn't show up at the Cheesecake Factory. You deserve better anyways.

Chin up champ. And you all deserve better than, living paycheck to paycheck. But the sad truth is, over half of Americans do. And here's what's even worse. That number is up over 20% from just two years ago. So what's the big deal? What is the big deal with living paycheck to paycheck? I mean, really? What is the big deal? Well, if you get a flat tire, or your AC goes out, or you have a medical emergency, you have no margin left in your budget to cover that expense. And here's what that means. You're going to cover that with credit cards or debt, which will cripple you financially. And here's a sad fact

for you, Americans who have consumer debt are 25% more likely to live paycheck to paycheck than those without debt. And here's what that consumer debt typically looks like. $6,000 in credit card debt, $38,000 in student loan debt, 30,000 to $40,000 in car loans. And guys, this problem's only getting worse. 24% of people are taking on more credit card debt right now than normal, thanks to inflation and post-pandemic revenge spending. I have never seen so many Italy trips on my Reels feed in my life.

There's either a trust fund going on or a boatload of debt involved. I don't know which one, and I don't like either of them. Now, I know some of you think the reason we have such a problem with living paycheck to paycheck and turning to debt is because wages haven't been able to keep up with the cost of living. And yes, while that may be true in some cases, this lack of financial margin is a trend for high-income earners as well. One out of three Americans making over $100,000 a year are also living paycheck to paycheck.

You heard that right. Let me say it again. One in three Americans making over $100,000 a year are living paycheck to paycheck. What does that tell me? This ain't a math problem. It's a behavior problem. It's not an ish me, it's an issue. And it has to do with one of the creepiest money trends of all-time, lifestyle creep.

Easily, one of the top five creeps. Up there with Orrin from Parks and Rec. I studied zoology in college. Now here's what lifestyle creep is. It's when your income goes up, and you're spending creeps right up to meet it, so you don't even notice. You don't even notice you got a raise because you just kept spending more and more. So how do you stop falling into these cycles where you have no financial

margin and you resort to debt. Well, you gotta get your spending under control and live a life with no payments. More on that in a minute. Sign number two, let's talk about this. The second sign that you're above average financially, you've got more than $1,000 in savings. Kudos if that's you. Now, that may not sound like a big achievement, but over a third of Americans have no savings at all, as in zero dollars. Guys, toddlers have more money in their piggy bank than the average adult. This is not okay. Oh, you're just gonna pretend I'm not here, huh? Americans who have money saved, only about half have a thousand bucks or more. And when we talk about retirement, the numbers get even worse.

On average, Americans have around $141,500 saved up for retirement. Now that's the average. Let's look at the median, which if you remember from third grade means the middle. That means half people have more, half of them have less. The median 401 balance, $35,345. If you're doing the sad math at home, that means half of all adults in the U.S. have less than 35,000 to retire on. This is a freaking crisis. If you're having a hard time wrapping your head around the implications, let me help you here. 35,000 wouldn't get you through one year,

let alone the last decade or two or three of your life. If you had to make 35,000 last for 20 years, you'd have about 1750 a year to live on. $1,750, aka $145 a month. Good night, nurse, you're screwed if that's you. And if you're thinking, well, hey, hold on, Social Security's to save the day. Are you serious? Nah, bro. It's on the struggle bus too. And for most people, Social Security only replaces about 37% of your past earnings.

So if your income when working was the average $70,000 per year, Social Security would supplement you $25,900 per year. Now imagine getting a 63% pay cut and still trying to have a great retirement. Combine that with the yearly $1,750 from your retirement, and you're at a whopping $27,650 to live on each year. That sucks. The teenage homeschoolers working at Chick-fil-A make more than that. Last but not least, the third sign you're above-average financially, you can pass the financial literacy test with flying colors.

Now, I know the term financial literacy sounds hoity-toity, like the word aparteefe or infinitesimal. Is there anything more ostentatious than a verbose sycophant? That is the least fancy thing I have ever heard. Anyways, what is financial literacy? It's simply knowing how to make smart decisions with your money. Financially illiterate people, they know how to create and stick to a budget. They know how to use sinking funds.

They know the difference between a 401k plan and a 529 plan. In other words, they've got a handle on budgeting, saving, investing, and they don't rely on debt. So let's get nerdy with it for a second. The 2022 TIA Institute GFLEC Personal Finance Index, which is like the SAT for financial literacy, showed that on average, adults only could correctly answer 14 of 28 basic money questions. And if you've been out of school too long to remember, 14 out of 28 is an F. And not like a soft F that your teacher bumps up to a D because she feels sorry for you and wants to spare you the shame of retaking algebra again. It's like an FF.

And 23% of these adults couldn't answer more than seven correctly. So to rate your own financial literacy, ask yourself these questions. Do you know how to create a monthly budget that includes all of your basic expenses, your bills, any debts, and your sinking funds for future purchases? Hope it's a yes. Next, are you currently debt-free? Or are you taking active steps to reduce your debts? Hopefully a yes. Do you know about how much money you spend to cover living expenses over a period of three to six months?

Hopefully yes. Do you have an emergency fund in place that would allow you to get through a sudden large life event like a layoff or a totaled vehicle without having to borrow money? Again, I hope it's a yes. Do you have an understanding of how compound interest allows invested money to grow over time? Do you know the different types of insurance that are needed to protect your money, your life, and your wealth? These are the types of questions every single one of us should be able to answer with confidence. And if you were a note to any of those, it's okay. I'm glad you're here and I'm glad we're learning together.

But you've got to be able to say yes to these if you want to build wealth and win with money. So a lot of numbers have been tossed around here, much like my bachelor days, when numbers would get tossed to me left and right. Listen, if I had a nickel for every number tossed, are you kidding me? I'd have no money. Now, even though we covered a lot, you're probably getting a good idea of how you stack up compared to the general population financially. So where do you start if you want to get above,

if you want to rise above those stats. Well, number one, you've got to get your spending in order through budgeting. Now, budgeting, it's got a bad rap. But budgeting all it really does, it allows you to tell your money where to go instead of wondering where it went. You're pre-planning to make good life decisions.

Now think of everything you spend money on during the month and list out your expenses like this. At the top, giving. I recommend giving 10% of your income. And if you're a person of faith, your local church is a great place to start. Next, I have saving. goals. And this depends on where you're at. Maybe if you're paying off debt, that's going to be

our plan. Use any extra money towards the debt. Maybe you want to save up that emergency fund. Maybe you have a vacation plan that you've got to save up for over a period of time. That's where your savings goals should go. We also have to cover the four walls. Food, utilities, housing, transportation. If you cover nothing else in your budget, you got to cover the four walls. Now, other essentials, these are things like your insurance payments, debt payments, child care, toilet paper. hair pomade, that's where it would fall under. And then finally, we have extras. Here's the fun part.

Entertainment, fun money for more hair pomade, going out with friends on the weekend, you name it. And beyond that, there may be month-specific expenses in miscellaneous stuff. Think about semi-annual expenses that might be due this month. Holidays coming up, weddings, birthdays, bar mitzvahas, kinsenierras, chupacabras. Boy, that escalated quickly.

You gotta be thinking about this stuff. My favorite way to do a budget is with an app called Every Dollar. You can download it for free in your app store, and it makes it super easy to list all this out and keep track of your spending. So what we've learned today is that financial margin, savings habits, and financial literacy, it's a big deal.

And the advice I just gave you, the plan I just laid out, it's gonna give you peace of mind and the resources you need to deal with the unexpected parts of life. Because being average financially sucks, and being weird, it's where it's at. Because I have sunglasses on and I'm weird. Now, if you're drowning in average, you don't have to stay that way.

I encourage you today right now, make a list of the things you're willing to do to get ahead. And if you've got questions about anything we talked about here today, let me know in the comments and I'll do my best to answer them. And our team wants to know what money topics you want to hear more about. So leave that in the comments as well. All right, guys, that's it for me. Thanks for watching.

See you next time.