Financial Literacy

Have you ever peeked over the fence to see if the grass is greener on your neighbor's financial lawn? It's a human trait to wonder how we stack up against others, especially when it comes to managing our money. Whether it's a friend who seems to vacation twice a year, a cousin buying their second home, or a colleague driving a new car every other year, these glimpses into others' lives can make us question: What is "normal" spending, credit scores, and debt? 

But trying to define financial normalcy is like searching for a mirage. It shifts and changes based on who you ask, where they live, and their life stage. Recognizing this variability is the first step toward setting personal financial goals tailored to your unique circumstances, not an elusive average.

When thinking about your financial situation, embracing a growth mindset is vital. A growth mindset - the belief that your abilities and intelligence can be developed over time - is a powerful tool when applied to managing your finances. It encourages resilience, learning from setbacks, and viewing challenges as opportunities for growth. As we delve into what statistics and anecdotes reveal about "normal" financial behaviors, remember that these benchmarks are not prescriptions but starting points. Your financial journey is uniquely yours, filled with opportunities to learn, grow, and redefine what success means to you.

Understanding Financial Norms and Setting Personal Goals

When it comes to personal finance, most people like to think of themselves as "normal." While some might relish the idea of being unique or unconventional, many find comfort in knowing that their financial situation is similar to that of their peers. However, defining what's "normal" regarding spending, credit scores, and debt can be challenging. To better understand financial norms, it's helpful to examine both anecdotal evidence from those around you and statistical data.

While understanding financial norms can provide valuable context, it's essential to remember that personal finance is just that – personal. Comparing yourself to others or striving to meet arbitrary standards of "normalcy" can be counterproductive and even detrimental to your financial well-being. Instead, consider setting personal financial goals aligning with your values, priorities, and circumstances. Begin by assessing your current financial situation, including your income, expenses, debts, and assets. That said, let's look at some national personal finance averages.

The Average Household

According to a 2023 report by the Federal Reserve, the average American household has a net worth of approximately $122,000, with about $58,000 in debt (excluding mortgages). The median household income, as reported by the U.S. Census Bureau in 2023, was around $75,000. While these figures might serve as a general benchmark, it's crucial to remember that personal financial situations vary greatly depending on factors such as age, location, and individual circumstances.

A Pew Research survey conducted in 2022 asked participants about their perceived financial security and stability. The findings revealed that 62% of respondents rated their financial situation positively, while only 30% gave the overall economy a favorable rating. Interestingly, these numbers have improved since a similar survey in 2019, suggesting a growing sense of optimism among Americans regarding their finances.

However, the survey also highlighted some common financial concerns. Nearly 55% of participants reported experiencing a "financial shock" within the past year, such as job loss, unexpected medical expenses, or major home or vehicle repairs. Additionally, 40% of respondents indicated they had no savings for emergencies or retirement. These findings underscore the importance of building financial resilience and preparedness, which many may overlook.

Setting Personal Financial Goals

Given the variability in what constitutes "normal" spending, credit scores, and debt, the focus shifts to the importance of setting personal financial goals. These goals should stem from your unique circumstances, aspirations, and values. Goals could range from achieving a specific net worth or savings target to reducing debt or investing in ways that align with personal beliefs and plans.

• Assessment - Begin by conducting a thorough evaluation of your current financial situation, including income, expenses, debts, and assets. This reality check forms the foundation of any goal-setting exercise.

• Prioritization - Given that resources are finite, prioritizing goals is crucial. For some, building an emergency fund might take precedence, while for others, paying down high-interest debt could be more urgent.

• Realistic Objectives - Goals should be ambitious yet achievable. Setting unrealistic targets can lead to frustration and demotivation. Break down larger goals into smaller, actionable steps to maintain momentum.

• Flexibility - Life is unpredictable. Be prepared to adjust your goals as circumstances change. Flexibility ensures that your financial plan remains relevant and aligned with your current needs and future aspirations.

• Reflection and Adjustment - Regularly reflect on your progress towards your financial goals. Celebrate successes, learn from setbacks, and adjust your strategies as needed to stay on track.

As you work on your goals, consider building an emergency fund to cover unexpected expenses or income disruptions. Aim to save at least a few months' living expenses in a separate savings account (though even a small emergency fund can still be very useful). This safety net can provide peace of mind and minimize using high-interest credit cards or other loans in times of crisis - helping to keep you on track for reaching your goals.

When it comes to debt, it's important to recognize that not all debt is created equal. While some forms of debt, such as mortgages and student loans, can be considered investments in your future, high-interest consumer debt can significantly drain your financial resources. If you're carrying credit card balances or other high-interest debt, prioritize paying these off as quickly as possible to minimize the interest you pay over time.

Finally, remember that financial success is a journey, not a destination. It's okay if your financial situation doesn't match that of others or align with national averages. What matters most is that you're taking steps to improve your financial well-being and working towards your personal goals. Celebrate your progress along the way, and don't be afraid to seek guidance from a trusted financial professional if needed.

The Takeaway

In a world where financial benchmarks and social media exert considerable influence, it's natural to wonder about norms. Yet, what truly matters is not how you compare to others but how you progress towards your financial goals. 

Adopting a growth mindset means celebrating each step forward, learning from setbacks, and understanding that every challenge is an opportunity to grow financially stronger. By focusing on personal financial goals rather than external benchmarks, individuals can chart a course toward financial well-being that is both meaningful and achievable. This approach fosters a healthier relationship with money. It supports a more nuanced appreciation of financial success that celebrates individual choice rather than simply keeping up appearances.

Have you ever wondered how your spending habits compare to those of the average American household? While it's natural to be curious about where you stand, it's essential to remember that personal finance is just that - personal. Understanding national spending patterns can provide a general framework for understanding how people allocate their money in general, but ultimately, the key to financial well-being lies in aligning your expenses with your unique values, goals, and circumstances. What works for one household may not be the best approach for another.

Average Household Spending

According to the Bureau of Labor Statistics' Consumer Expenditures Survey, the average American household spends around $77,000 annually. Housing, the most significant expense category, accounted for just over $25,000, followed by transportation at approximately $13,000 and food at $9,900. Insurance and retirement savings come in at $9,500, while healthcare averages around $6,000 annually. Finally, entertainment costs around $3,600 and clothing costs aroundr $2,000 per year for the average household.

These figures vary significantly based on geographic location, household size, and individual preferences. For example, overall housing costs tend to be higher in metropolitan areas and coastal regions. In San Francisco, one of the most expensive cities in the United States, the median home price was $1.1 million in early 2025, compared to the national median of around $420,000. So, what's "average" can vary significantly!

The average household spending figures are also based on a statistically relevant but improbable household of 2.4 people. For example, when adjusting the food expense category to a family of four, the average increases to over $16,000 annually.

What It All Means

While these averages provide a general framework for understanding spending patterns, they likely don't address your unique household, income, or location. As you examine your spending habits, it's essential to align your expenses with your values and goals.

To gain a better understanding of your spending, start by tracking your expenses for several months. Categorize your expenses into essential and discretionary items. Look for patterns and identify areas where you may be overspending or your spending doesn't align with your values and goals.

Next, create a budget that allocates your income towards your essential expenses, savings goals, and discretionary spending in a way that aligns with your priorities. Be sure to include room for unexpected expenses and financial emergencies, such as car repairs or medical bills. Regularly review and adjust your budget as needed to ensure you're staying on track and making progress toward your goals.

It's also important to recognize that emotions, social pressures, and marketing tactics can influence spending habits. To combat these influences, practice mindful spending by asking yourself whether a purchase aligns with your values and goals before moving forward. Surround yourself with like-minded individuals who support your financial priorities and avoid comparing your lifestyle to others, which can lead to unnecessary spending.

The Takeaway

Ultimately, how you allocate your money is a personal decision that should be guided by your unique circumstances, values, and aspirations. By proactively managing your expenses, prioritizing your goals, and aligning your spending with what matters most to you, you can cultivate a sense of financial well-being and satisfaction, regardless of how your spending compares to national averages. 

Remember, the key to financial success lies not in adhering to a predetermined formula but in creating a personalized plan that works for you and supports your journey toward a fulfilling life.

When it comes to financial well-being, credit scores play a crucial role in determining your access to loans, credit cards, and even rental housing or employment opportunities. A credit score is a numerical representation of your creditworthiness based on factors such as your payment history, credit utilization, and length of credit history. While it's natural to wonder how you compare to others, focusing on improving your credit health is essential rather than striving for an arbitrary "average."

Understanding Credit Score Ranges

Credit scores typically range from 300 to 850, with higher scores indicating lower credit risk. The most commonly used credit scoring model is the FICO score, used by 90% of top lenders in the United States. Here's a breakdown of FICO score ranges:

• Exceptional: 800-850
• Very Good: 740-799
• Good: 670-739
• Fair: 580-669
• Poor: 300-579

It's important to note that different lenders may have their own criteria for what constitutes a "good" credit score, and some may use alternative scoring models, such as VantageScore.

Average Credit Scores

According to Experian's 2024 Consumer Credit Review, the average FICO score in the United States reached an all-time high of 715. This score represents a steady increase from previous years, with the average score being 711 in 2020 and 688 in 2010, but a slight drop from 2023. 

However, average credit scores vary based on demographics. For example, younger consumers tend to have lower scores due to shorter credit histories and higher credit utilization rates. 

Geographic location also plays a role in average credit scores. In 2024, Minnesota had the highest average FICO score at 742, while Mississippi had the lowest at 680.

The Impact of Credit Scores

Your credit score can significantly impact your financial life. A high credit score can help you qualify for lower interest rates on loans and credit cards, potentially saving you thousands of dollars over time. On the other hand, a low credit score can make it difficult to secure financing or result in higher interest rates and less favorable terms.

In addition to affecting your borrowing power, credit scores can also influence your ability to rent an apartment, get a cell phone contract, or even land a job. Some employers, particularly those in the financial sector or positions involving handling money, may check credit reports as part of the hiring process.

Improving Your Credit Score

While it's informative to understand average credit scores, the most important thing is to focus on improving your credit health. Here are some actionable steps you can take:

• Pay your bills on time - Payment history is the most significant factor in determining your credit score. Set up automatic payments or reminders to avoid missing any due dates.

• Keep credit utilization low - Aim to use no more than 30% of your available credit on any given card, and ideally keep it under 10%. High credit utilization can signal financial stress to lenders.

• Don't close old accounts - The length of your credit history matters, so keeping older accounts open can help boost your score.

• Limit new credit applications - Each time you apply for credit, a hard inquiry is made on your credit report, which can temporarily lower your score. Only apply for new credit when necessary.

• Monitor your credit reports - Regularly check your credit reports for errors or signs of fraud. You're entitled to one free report from each of the three major credit bureaus annually at AnnualCreditReport.com.

If you need help improving your credit, consider seeking help from a reputable credit counseling agency or a trusted financial advisor.

The Bottom Line

While it's helpful to understand average credit scores as a point of reference, it's crucial to remember that your credit journey matters most. Rather than striving to meet a specific number, focus on consistently practicing good credit habits and making progress towards your financial goals. Remember, building and maintaining good credit is a lifelong process. Whether your score is above or below average, there's always room for improvement and growth. By staying committed to responsible credit management and seeking guidance when needed, you can achieve your financial goals and enjoy the benefits of a healthy credit score.

Debt is a fact of life for many Americans, with the average household owing $105,00 across various debt categories, according to recent data from the Federal Reserve. From mortgages and auto loans to credit card balances and student debt, it's easy to feel overwhelmed by the sheer variety and magnitude of financial obligations. But how does your debt profile compare to the national average, and what can you do to manage your debt effectively?

Breaking Down the Numbers

To understand the landscape of American debt, let's take a closer look at some of the most common debt categories:

• Mortgage Debt - At the end of 2024, the total mortgage debt in the U.S. stood at a whopping $12.6 trillion, with the average mortgage balance per household at $263,000. However, this figure varies significantly by location, with states like California and Hawaii having much higher average mortgage balances due to their expensive housing markets.

• Student Loan Debt - Student loan debt has been a growing concern in recent years, with the average borrower owing aroud $38,000 in student loans. However, this number can be much higher for those who pursued advanced degrees or attended private universities.

• Auto Loan Debt - Americans love their cars, and auto loan debt has risen steadily in recent years. As of late 2024, the total auto loan debt in the U.S. was $1.65 trillion, with the average borrower owing $41,000 on new vehicle purchases.

• Credit Card Debt - Credit card debt is often considered one of the most dangerous types of debt due to high-interest rates and the ease with which balances can spiral out of control. In late 2024, the total credit card debt in the U.S. reached $1.21 trillion, with the average household owing $9,200 in credit card balances.

While some levels of debt can be manageable and even necessary for achieving specific financial goals, such as homeownership or obtaining a college education, high levels of debt can have serious consequences for individuals and the economy as a whole.

At the individual level, high debt can lead to financial stress, decreased savings, and a reduced quality of life. Struggling to keep up with debt payments can make it difficult to afford necessities, let alone save for emergencies or long-term goals like retirement. In extreme cases, unmanageable debt can lead to bankruptcy or foreclosure, which can have long-lasting effects on one's financial health.

On a broader scale, high levels of household debt can slow economic growth and increase the risk of financial instability. When a significant portion of the population is burdened by debt, consumer spending tends to decrease, which can lead to reduced business investment and job losses. For example, if many borrowers default on their debts simultaneously, it can trigger a financial crisis, as seen during the Great Recession of 2007-2009.

Managing Your Debt Effectively

If you struggle with debt, it's essential to take proactive steps to manage your obligations and work towards a more stable financial future. Here are some strategies to consider:

• Create a Budget - Understanding your income and expenses is the first step in managing your debt. Create a detailed budget that accounts for all your monthly obligations, including debt payments, and look for areas where you can cut back on discretionary spending.

• Prioritize High-Interest Debt - Focus on paying off debts with the highest interest rates first, such as credit card balances, as these can snowball and become unmanageable.

• Consider Debt Consolidation - If you have multiple debts with high interest rates, consolidating them into a single, lower-interest loan can make your debt more manageable and help you pay it off faster. Think twice about consolidating federal student loan debt, however. Loan consolidation with a private lender means you'll lose access to valuable repayment plans other options.

• Seek Professional Help - If you're feeling overwhelmed by debt, don't hesitate to seek assistance from a reputable credit counseling agency or financial advisor. They can help you develop a personalized debt repayment plan and provide guidance on managing your finances.

• Be Patient and Persistent - Paying off debt takes time and discipline. Stay committed to your repayment plan, celebrate your progress along the way, and don't hesitate to re-evaluate and adjust your strategy as needed.

The Takeaway

While the national debt averages can provide a valuable benchmark for understanding the scope of American debt, it's crucial to remember that your financial situation is unique. If your debt is less than the national average, go ahead and pat yourself on the back. If it's more, don't be discouraged - you're not alone. Rather than comparing yourself to others, develop a debt management plan that suits your specific circumstances and goals.

Remember, no matter how daunting your debt may seem, there are always steps you can take to improve your situation and achieve your financial goals. If you need help, reach out to a financial professional or non-profit credit counseling organization.

Where you live can make a big difference when it comes to income. From state to state and city to city, the income landscape varies dramatically, with factors such as local industries, cost of living, and education levels all playing a role in shaping earnings potential. As a consumer, understanding these differences can help you make informed decisions about where to live, work, and invest in your future.

The Top 1%: A State-by-State Comparison

To get a sense of how much income can vary across the country, let's look at what it takes to be in the top 1% of earners in different states. In 2021, the national average income for the top 1% was $597,815. However, this figure varies significantly by state:

• In Connecticut, you need an annual income of $896,490 to be in the top 1%.
• In New York, the top 1% threshold is $777,126.
• In Mississippi, an income of $383,128 puts you in the top 1%.
• In West Virginia, the top 1% earns at least $350,212 annually.

These differences are even more striking when you compare metro areas. In the San Francisco Bay Area, for example, you need to earn at least $1.4 million per year to be in the top 1%, while in rural parts of West Virginia, the top 1% threshold is around $255,000.

Median Income: What the Typical American Family Earns

Of course, most of us aren't in the top 1%. So, what does the income picture look like for the typical American family? According to the U.S. Census Bureau, the national median household income in 2021 was $70,784. But again, this figure also varies widely by location:

• In Maryland, the median household income is $94,384.
• In Mississippi, the median household income is $46,511.
• In the San Francisco metro area, the median household income is $121,826.
• In the McAllen, Texas metro area, the median household income is $42,296.

What accounts for these differences? A lot of it has to do with the types of industries and jobs available in different areas. Cities with many high-paying tech and finance jobs, like San Francisco and New York, tend to have higher median incomes than areas with more service and agricultural jobs, like parts of Texas and the rural South. On the other hand, those areas are also likely to have significantly higher state and even local income taxes.

One of the most significant factors that determines income is education. According to the Bureau of Labor Statistics, workers with a bachelor's degree earn a median weekly income of $1,334, compared to $809 for those with only a high school diploma. Over the course of a lifetime, that education premium can add up to hundreds of thousands of dollars in additional earnings.

Education benefits individuals and has spillover effects on local economies. Areas with a higher proportion of college-educated workers tend to have higher median incomes and more economic growth over time, as skilled workers attract high-paying industries and create a cycle of prosperity.

Navigating Income Differences

So, what does all this mean for you as a consumer? First and foremost, it means that when considering where to live and work, it's essential to look beyond just the salary numbers. A higher income in a high-cost area like San Francisco may not translate to a higher standard of living than a lower income in a more affordable area like Houston or Atlanta.

It also means that investing in your education and skills development can pay off big time in terms of earning potential. Whether pursuing a college degree, getting a professional certification, or learning new skills on the job, anything you can do to increase your knowledge and abilities can help you command a higher salary and open up new career opportunities.

The American Dream: Income Mobility and Opportunity

Finally, it's worth remembering that while income differences across the country can seem significant, they don't have to be destiny. Research has shown that some areas of the country have higher rates of income mobility than others, meaning that children from low-income families have a better chance of moving up the income ladder throughout their lives.

Of course, the American Dream - the idea that anyone can succeed through hard work and determination - is still a powerful ideal. By understanding the factors that shape income differences and taking steps to invest in your own human capital, you can help ensure that the dream remains alive and well for generations to come.