13 Scary Financial Statistics And How To Help Avoid Becoming One

With roots in an ancient pagan festival held to ward off evil spirits, Halloween and the weeks leading up to it mark the perfect time to sit around a roaring fire under the full moon and share scary tales with family and friends. Arguably the best stories are those with just enough truth to strike fear in the hearts of the bravest among us, like tales of the ominous “October Surprise.”

Also known as the October Effect, the tenth month of the year sees even the bravest economists and investment managers nervously peering over the shoulder. That’s because October is known for some of the scariest events the financial markets have ever witnessed. These include the banking panic of 1907, which eventually led to the Federal Reserve Act of 1913 that created the Federal Reserve System, the stock market crash of 1929 that heralded the Great Depression, and Black Monday on October 19, 1987, when the stock market fell on a single day by more than 20%.

Trick or treat?

Although these events all took place in October, its reputation for producing the scariest financial stats is actually a bit exaggerated. In fact, October is actually known as the bear market killer, having historically marked the end of more bear markets than the beginning.* That doesn’t mean, however, that scary tales of financial troubles aren’t lurking around every corner. For those brave enough to read on, we’ve uncovered thirteen scary financial stats and steps you can take to avoid becoming their next victim.

  1. 56% of Americans cannot afford a $1,000 emergency expense from their savings account (bank rate)
  2. Only about two out of three adults could afford a hypothetical $400 expense with cash or its equivalent. (Federal Reserve)
  3. 24% of consumers have no savings save for emergencies. (Bureau of Consumer Financial Protection)
  4. $8,942 is the average credit card balance for US households (WalletHub)
  5. 56% of workers report having less than $500,000 saved for retirement, including 36% projecting less than $250,000 in savings. (plan sponsor)
  6. Only 22% of Americans are close to retirement say they have enough money to retire, up from 26% in 2021. (PlanSponsor)
  7. Only 23% have a written retirement planwhile 40% have something planned but no formal plan
  8. 37% no planning made. (plan sponsor)
  9. 44% of retirees said her retirement spending will be higher than expected (PlanSponsor)
  10. 51% of American adults Postponed at least one major life decision for financial reasons in the past year, 20% more than a similar survey conducted in 2007. (CPA Practice Advisor)
  11. The consumer price index rose by 8.3% over the last 12 months in August, not seasonally adjusted (NSA). In addition, the index for all items excluding food and energy rose 0.6 percent (SA) in August; up 6.3 percent over the year (NSA). (US Bureau of Labor Statistics)
  12. 6.89% was the current average mortgage rate for a 30-year loan on October 6, 2022, the highest level since November 2008 (Bankrate)
  13. The S&P 500 ended September down 25.2%. (Carson group)

How can you avoid becoming the next victim of a scary financial statistic?

Start saving now. If you don’t have an emergency fund, set one up now. An emergency fund creates a safety net for managing unexpected expenses. It can help you avoid high-yield credit card debt or dive into long-term assets that can be impacted by market fluctuations in the event of a job loss, health crisis, expensive car repair, or other unforeseen expense. Most financial experts recommend that your emergency savings cover six months of ongoing living expenses. But even if you can only save a small amount each month, making a habit of saving is more important than how much you set aside to begin with.

Maintain a budget. This is one of the most effective ways to find ways to reduce spending to save more. Even if you can only find an extra $5 a day, that adds up to $1,825 in savings over the course of a year. And thanks to rising interest rates, you can now earn even more with cash. Your budget is also an important tool for managing current debt and avoiding new debt. As you pay off existing debt, you’re redirecting those monthly payments into short- and long-term savings.

Contribute to retirement savings. While inflation and high interest rates have made it difficult for people to put money aside for short- and long-term savings goals, saving for retirement is a crucial building block for maintaining your lifestyle when you’re no longer working. The longer you wait to start saving for retirement, the less money you may have when you’re ready to stop working. This is important because Social Security replaces only about 40% of the average retired worker’s preretirement income. Even if you plan to work later in life to bridge the gap between Social Security and a pension (if you have one), circumstances beyond your control, such as e.g. illness, injury or dismissal, necessitate a change of plan.

Luckily, when it comes to your savings, time is always your friend. This applies in particular if you save thanks to tax-privileged compounding through a qualified pension plan, e.g. a 401(k), 403(b), or an Individual Retirement Account (IRA). That means your retirement account investments have the potential to grow even faster than similar taxable investments, since account earnings aren’t taxable until they’re distributed, typically in retirement. Ideally, you’d want to maximize your savings potential by paying the maximum annual amounts into all plans you’re eligible to participate in, including make-up contributions once you’re eligible.

make a plan A financial plan is your blueprint for building and managing wealth at every stage of life. As reported in PlanSponsor, 91% of people with a written retirement plan say it was useful to them, while 33% said it was “critical” in putting them on a better retirement path. That’s because a plan documents your goals and outlines a strategy to support them at every stage of your life. It also allows you to make adjustments over time as your needs change, goals shift, and milestones are met. A well thought out plan can help you resist the urge to adjust your strategy solely based on current market conditions. Because it is aligned with your short- and long-term goals, it aims to help you stay on track regardless of daily market activity or changing economic conditions. That can go a long way in curbing the fear and anxiety that volatility and uncertainty can bring — especially in a year like this.

Don’t be afraid of the (market) reaper. According to Ryan Detrick, chief market strategist for Carson Group, CMT, there’s no way to sugarcoat things — 2022 was a tough year. While bonds have historically performed well when stocks have underperformed, in 2022 they have not. The last five times the S&P 500 fell 10% or more over the year, bonds (as measured by the Bloomberg US Aggregate Bond Index) were up an average of 7.7% each time. While that might not feel good, it’s important to remember that the stock market doesn’t care about what just happened, only what comes next.

“The good news is that once a bear market is down 25%, returns can be pretty strong, with the S&P 500 up an average of almost 23% a year later,” says Detrick. “Also, many lows occurred shortly after this milestone was reached, so a big low could be close.”

It’s all the more important to stick to your current investment strategy, provided it fits your goals, time frame, and risk tolerance. You want to avoid selling at the bottom of a bear market, especially when higher returns are expected in the near term. Selling at the bottom could hurt your investments badly for years to come. Many investors have learned this the hard way in the past. By exiting the market to avoid falling prices, they missed out on significant rallies as stocks eventually returned to new highs. Keep in mind that the fourth quarter is historically the best quarter of the year, with the S&P 500 up 4.1% on average and nearly 80% of the time. While past performance is not a guide to future results, we believe stronger returns could be very likely in the coming weeks and months.*

Be sure to visit our resource blog for the latest insights from industry experts on the markets, the economy, and your planning needs.

*carson group, 7 things worth knowing about the historically strong fourth quarter

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