Even homeowners who have paid off their mortgage may be finding that their available equity is not enough to downsize, according to a story published Saturday by The New York Times. The article also notes that reverse mortgages are a potentially valuable tool for seniors in the current housing environment.
Roughly 80% of older adults live in the homes they own, but housing costs and interest rates have combined to create a challenging scenario for some older people seeking to downsize into a more manageable home. The prices for smaller townhouses or condominiums can, in some cases, outweigh the prices for larger single-family homes.
“[T]he traditional notion that a house with a paid-off mortgage can serve as an A.T.M. to help fund retirement living is shifting, economists report. Homeownership no longer is an unqualified benefit for some seniors,” the story explained.
Urban Institute research economist Linna Zhu rhetorically asked if seniors were “aging in place, or stuck in place.”
According to data from Harvard University’s Joint Center for Housing Studies (JCHS), the share of older adults carrying mortgage debt rose significantly between 1989 and 2022, going from 24% to 41%. During that same period, the typical amount owed on these mortgages rose from $21,000 to $110,000.
These larger mortgage balances, combined with elevated interest rates, have made impacted seniors “cost-burdened,” according to 2023 data from the JCHS, meaning they spend at least 30% of their income on housing costs.
But with rising home prices have also come higher levels of home equity, which recently led Boston College’s Center for Retirement Research (CRR) to reduce “its estimate of the proportion of American households at risk of being unable to maintain their standard of living after retirement,” the Times reported.
The CRR’s so-called “retirement risk index” fell to 39% in 2022, down from 47% in 2019. The organization “bases its calculations on older homeowners tapping their home equity with reverse mortgages,” the Times explained.
A profiled couple obtained a Home Equity Conversion Mortgage (HECM) sponsored by the Federal Housing Administration (FHA) in 2020, which allowed them to “pay off their existing mortgage, afford cataract surgery and complicated dentistry (neither one was covered by Medicare, in this instance), replace a 22-year-old car and upgrade their plumbing, all while keeping their retirement savings intact,” the Times stated.
Zhu of the Urban Institute told the Times that reverse mortgages are “a very effective way to tap home equity,” but product adoption by seniors — as is true with many equity-tapping options — remains low.
Housing researcher Jennifer Molinsky noted that home equity is seen as “a nest egg” for those in later life, but many seniors are hesitant to tap it as a financial resource. Instead, many seniors see it as more of an emergency resource, only to be tapped when no other options exist.
“Besides, accessing home equity isn’t always simple or possible,” the Times stated. “With federally insured reverse mortgages — officially [HECMs] — the upfront costs are high […] and the paperwork substantial. In 2022, only 64,500 older applicants received reverse mortgages through the federal program.”
One researcher said that the situations of older adults could be bettered by “improving and streamlining the federal HECM program, broadening the criteria for refinancing and [home equity line of credit (HELOC)] loans, and encouraging the development of more housing, including homes and apartments suitable for older buyers and tenants.”
Discover methods to achieve financial harmony in relationships and why fiduciary advisors are often considered trustworthy.
Sara’s Corner: How can couples equitably share the mental load of managing finances? Can you trust fiduciary financial advisors? Hosts Sean Pyles and Sara Rathner begin with a discussion about the division of financial responsibilities among couples to help you understand how to create financial harmony in your relationship.
Today’s Money Question: Elizabeth Ayoola joins Sean to explain how you can choose a financial professional to work with, starting with an in-depth look at different types of fiduciaries including Certified Financial Planners (CFPs), financial coaches, and financial therapists. They discuss the nuances of fiduciary compensation structures and explain how you can advocate for yourself when selecting a financial advisor to work with.
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Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
Do you know which financial advisors you can trust and which might just be looking to make a buck? Well, this episode will help you sort the good from the sketchy in the world of financial advice.
Sara Rathner:
Welcome to NerdWallet’s Smart Money Podcast, where we help you make smarter financial decisions one money question at a time. I’m Sara Rathner.
Sean Pyles:
And I’m Sean Pyles. This episode, we’re joined by our co-host Elizabeth Ayoola to answer a listener’s question about fiduciary financial advisors. Are they all they’re hyped up to be and how do they compare to other folks looking to make money from giving advice?
Sara Rathner:
I would say the answer to those questions are usually, and they’re better, but I don’t want to steal your and Elizabeth’s thunder.
Sean Pyles:
I appreciate the restraint, Sara, even though you did just say those things.
But anyway, before we get into that, we’re going to hang out for a bit in Sara’s Corner. This is a thing I just made up where we hear from Sara about something that she recently wrote. Sara’s Corner, it’s cozy here.
Sara Rathner:
I mean, I do keep a blanket on the back of my desk chair, so it is cozy here.
Sean Pyles:
Sounds nice.
Sara Rathner:
Yeah. My corner is cozy and also may be full of emotionally fraught conversations because I do really like to write about couples and money, so let’s bring on the fighting.
Sean Pyles:
Yeah, that’s a good combination, I’d say.
So Sara, you recently wrote an article about how couples can share the mental load of money management. So to start, what inspired you to write this article? Are you giving us a peek into the Rathner household?
Sara Rathner:
Maybe a little deep down, but honestly, it’s really about what my social media algorithms are serving up lately, besides baby sleep experts and a little bit of Zillow Gone Wild, which is an account I highly recommend. So fun. You never know when an indoor pool’s going to pop up.
There are quite a few people who are influencer-type personalities who discuss topics like the mental load and emotional labor within families and within households, and it got me thinking about something that causes a lot of fights about who’s handling what task, and that is, as always, money.
Sean Pyles:
So in your article, you write that “Couples can fall into unproductive patterns that can lead to conflict, resentment, and even willful ignorance.” And this goes beyond money in a lot of relationships, and I do feel like this is something that anyone who’s been in a long-term relationship can relate to. So can you give us an example of one of these unproductive patterns and how can they be damaging to a relationship?
Sara Rathner:
One source I interviewed talked about what they called a manager-follower dynamic where one person in the couple is in charge and they delegate tasks to their significant other, and that’s fine at work. At home, it could also be fine depending on the task, but sometimes it could get a little icky, and even if one person is handling 100% of a task, you are both benefiting equally from that labor.
Sean Pyles:
Yeah. That reminds me of friends I’ve talked with who have found themselves in relationships with partners who really want a parent more than an actual partner, and that can be exhausting to deal with.
Sara Rathner:
Yeah, it’s totally fine to divvy up a task and have one person kind of be like, “I’m the point person for this, so if you have any questions about it, come and ask me,” but you’re agreeing to that together. It’s not this automatic, “Well, I’m the more adulty adult here and you act like a child, so I’m going to be your parent.” That’s a really gross dynamic to have in any romantic relationship. If you are in that right now, I don’t know, reconsider.
Sean Pyles:
Yeah, it can really strip away the romance from that relationship.
Sara Rathner:
Yeah, there’s nothing romantic about constantly reminding your partner to pick up their damn socks already. Adults can put socks in hampers, I’m just saying.
Sean Pyles:
That’s very true. Well, the hard thing is that with money, this can be a really easy dynamic to slip into because one person might know more about managing money than the other, so they end up just taking on all the money tasks or they delegate specific tasks to their partner, and if only one person knows about the finances of the household, that can be a very risky situation for both parties in the relationship.
Sara Rathner:
Exactly. And again, it’s totally fine and totally normal for one of you to feel more confident dealing with money. Maybe you’ve just managed your money differently back when you were single, maybe you work in finance. That is normal, but it’s still both of your responsibility.
And the same source that told me about the manager-follower dynamic also said to me that like any task, money tasks are things that you can learn by doing. So even if you are the less confident one in your relationship when it comes to these kinds of responsibilities, you can still grow your skill set. You can learn by doing. And so as you go forward in the future, you can take on more and more tasks with confidence and not fall into that dynamic where you’re constantly relying on the other person to tell you what to do.
Sean Pyles:
Let’s turn to some solutions. You first suggest that couples approach money as equals, which sounds great. Is the idea here that no one person in the relationship should have more power over their finances than another?
Sara Rathner:
Absolutely. The dynamic where one person handles everything and the other person could not be bothered to know the passwords to any accounts is not good. That’s not a healthy dynamic. At best, it’s unfair. The division of labor is, in that case, is putting a lot of that work on only one person’s shoulders, and at worst, it could be a sign of financial abuse. Withholding your partner’s access to finances is sometimes a situation where you are dealing with abuse and that’s something to keep your eyes open about. But even if your partner is totally happy to hand off the work and know nothing of the household finances, they could end up in a really tough spot if your relationship ends, either through divorce or breaking up or even if the partner passes away.
Sean Pyles:
So it might be a good idea for couples that are living together, have a long-term relationship, and have somewhat intermingled finances to even know the logins to each other’s accounts. Is that something that you’ve explored too?
Sara Rathner:
Yeah, you could even use a password manager to do that because you can share passwords with each other very easily or you could be really lo-fi about it and just have a list stored in a secure place like a safe that you keep updated once a year. You definitely want to both be equal partners in access to the money even if you don’t necessarily divvy up those month-to-month or week-to-week tasks equally.
Sean Pyles:
Well, what about actually getting those money tasks done? How should couples determine who does what?
Sara Rathner:
Well, this is where the whole money date thing comes, and we talk about this a lot. Sit down, pour yourself the beverage of choice, a cup of tea, a glass of wine, and have a chat about what bills are due, what savings goals you have, which kid has outgrown their clothes and needs to go shopping because that’s also a financial thing, all those sorts of money-related responsibilities that you have coming up in the next week, the next month, even the next three months. And in that conversation, you can also divide up the tasks.
Sean Pyles:
And it can be helpful to have different types of meetings at different times. Maybe once a quarter you have a higher-level meeting where you think about where you want to be at the end of that quarter or at the end of the year. And then at the beginning of each month, you can think, “Okay, here are the things we need to get done this month,” and then maybe even on a weekly basis, you can think more tactically around, “Okay, we need to get a bunch of whatever thing at Costco this week and that’s going to be a bigger bite out of our grocery budget, so let’s make sure we make room for that,” just so you have different conversations at different levels as you are managing your finances together.
Sara Rathner:
Yes, and I like to think of it in terms of that timeframe. What has to be done in the next few days, what has to be done this month, and then what’s a longer-term conversation?
Sean Pyles:
Well, this reminds me a little bit about how my partner and I manage other household tasks like doing the dishes, for example. In general, in our household, whoever cooks dinner does not have to load the dishwasher, and if you load the dishwasher, you don’t have to unload the dishwasher when it’s clean. And for us, it really comes down to being about balance.
Sara Rathner:
Exactly. And by splitting up responsibilities this way, you’re also acknowledging the labor that the person who cooked is performing. You do the dishes because you respect the work it took for the other person to cook. And in my house, because we have the baby to wrangle, I do most of the cooking. While I am doing that, my husband is handling the child care because I don’t want to stop cooking to change a dirty diaper because that’s unsanitary. So in our home, it’s this acknowledgement of, “You are 100% dealing with a baby and I’m 100% dealing with the cooking, and we have to split this moment up in order for us to get dinner on the table.”
Sean Pyles:
Well, do you have any other advice for how couples, or I guess anyone co-managing a household together, can find a more harmonious way to manage their finances?
Sara Rathner:
So another thing is once you divvy up those tasks during that money date, another really important thing is owning tasks that you agree to take on from start to finish. And this is where we talk about weaponized incompetence and all those psychological phrases that get thrown around on social media when you say you’re going to do something and you don’t do it and you’re, “Eh, it’s too hard.” No, it’s not.
Sean Pyles:
Just do it.
Sara Rathner:
Right. If you show your partner that you’re going to agree to do something and then you don’t do it to an agreed upon level of completion, you’re showing them that they can’t trust you.
So in your money date, not only do you talk about the major overarching tasks that you both need to complete, but you can break them down into subtasks so it doesn’t feel quite so intimidating. So if you’re the one to step up to own a task, that means you take care of it from start to finish, and it doesn’t mean you can’t ask for help if you get stuck. You are still partners, but you are just the one spearheading everything.
Sean Pyles:
Well, Sara, thanks for sharing your insights. I like hanging out in this corner with you. It’s cozy.
Sara Rathner:
I’ll bring a second blanket for next time-
Sean Pyles:
Thank you.
Sara Rathner:
… so we could build a fort together.
Sean Pyles:
I love it. And listener, if you want to check out Sara’s article, you can find a link to it in this episode’s show notes.
And now let’s check in on this month’s Nerdy question, which was what’s the best thing you spent money on this month? Last week, we heard from a listener who spent money on a third opinion from a doctor ahead of a major surgery and was able to find a more effective and less invasive way to resolve their pain. So hooray for taking charge of your own healthcare.
Sara Rathner:
And here’s what another listener texted us. “Hello. My favorite purchase so far is a used grand piano. I paid $4,000 and $1,000 to move it to my apartment on the third floor, no elevator, but it’s the best money I spent.” Wow. “I practice more than four times a week and it’s worth every penny.”
Sean Pyles:
Ugh, I love that this listener is spending money on something that is both a creative outlet and also likely a very beautiful thing to just have in their apartment. And I’m not going to pretend like spending $5,000 is nothing, it’s a significant chunk of change, but I’m willing to bet that they will get some good use out of it and it might just end up that they put some family photos on it eventually after the novelty of having a piano wears off, but still, it’ll be nice to look at.
Sara Rathner:
Also, I’ll say that having lived in a third-floor walk-up apartment, can I just say how impressed I am that it’s possible to get a grand piano up there? Because that was not what the staircase was like in the apartment building I was living in. Maybe you could hoist it through a window?
Sean Pyles:
Yes, I think you do have to do that. You take out the window. Sometimes you have to get a permit from the city. It can easily be $1,000 or more depending on where you are.
Well, listeners, we have so loved hearing from you and all of the great things that you are doing with your money. So to share the best thing that you spent money on last month, text us or leave a voicemail on the Nerd hotline at 901-730-6373. That’s 901-730-NERD, or email us a voice memo at [email protected].
Sara Rathner:
And while you’re at it, send us your money questions too. It is quite literally our job to answer them and we love to hear what situations you’re mulling over. So please tell us and we’ll try and solve these problems together.
Sean Pyles:
Well, before we get into this episode’s money question, we have an exciting announcement. We are running another book giveaway sweepstakes ahead of our next Nerdy Book Club episode.
Sara Rathner:
Our next guest is Jake Cousineau, author of How to Adult: Personal Finance for the Real World, which offers tips to young people on how to get started with managing their money.
Sean Pyles:
To enter for a chance to win our book giveaway, send an email to [email protected] with the subject “Book Sweepstakes” during the sweepstakes period. Entries must be received by 11:59 p.m. Pacific Time on May 17th. Include the following information: your first and last name, email address, zip code, and phone number. For more information, please visit our official sweepstakes rules page.
Now let’s get into my conversation with our co-host, Elizabeth Ayoola, about whether fiduciaries are all they’re hyped up to be.
We’re back and answering your money questions to help you make smarter financial decisions. And this episode’s question comes from Ian, who wrote us an email. Here it is. “Hi, team. I hear fiduciaries being peddled like some kind of miracle cure for financial planning, but I’m curious how being a fiduciary actually works. What is the enforcement mechanism? Is there a licensing body, like for nurses or doctors? What makes a fiduciary more trustworthy than someone who is making a promise that they totally have your best interest in mind? Cheers, Ian.”
Elizabeth Ayoola:
This is a good question to ask, especially if you’re trusting someone with your money. And I really like this topic because I recently covered it in a paraplanner course I’m taking. Sean, I know you’re also in the deep waters of coursework since you’re studying to become a certified financial planner professional, which is a fiduciary role. So you’re going to answer Ian’s question so we can test your knowledge.
Sean Pyles:
That is right.
Elizabeth Ayoola:
Sean Pyles:
A fiduciary is just a fancy term for someone who has an obligation, usually a legal or professional obligation, to put their client’s interests before their own. A fiduciary can be a doctor caring for your health, a family member managing someone’s estate, or in this case, a financial professional who is managing the personal finances of their clients.
Elizabeth Ayoola:
Okay. So in summary, a fiduciary prioritizes you and not their pockets.
Sean Pyles:
That is the idea and the hope, but there’s a little more to it than that, and I really have to hand it to this listener because I appreciate their skepticism about what it means to be a fiduciary because they are touted as the gold standard among financial advisors.
I also think we need to zoom out a little bit and talk about what it means to be a financial advisor because the term “financial advisor” is not regulated. Anyone can call themselves a financial advisor, even the sketchiest, hustle-culture peddlers on TikTok.
Elizabeth Ayoola:
I actually think we could do an entire episode on that, Sean. Right now there’s so many people sharing financial advice, and I’m afraid that people might not be doing enough vetting before taking these people’s financial advice, or even realizing that all advice shared doesn’t have their best interests at heart.
Sean Pyles:
Yeah. And as a side note, I’m not a fan of imposter syndrome, but the personal finance space is one where maybe more people should feel imposter syndrome because there are just too many people online without qualifications or experience telling others what to do with their money.
Elizabeth Ayoola:
I second that. And the wrong advice could really lead to great financial chaos for people, so they should absolutely be scared of sharing inaccurate or misleading advice.
Sean Pyles:
Totally. And if I’m being completely honest with myself, part of why I’m pursuing the CFP certification is to quell my own occasional imposter syndrome because I, as a professional in the personal finance space, want to get as much information as I can and I want to be as qualified as I can be to help others, but that’s just me holding myself to a very high standard that I think maybe other people should hold themselves to as well.
Elizabeth Ayoola:
And that’s why I like you, Sean. Okay, obviously there’s other reasons I like you too, but that’s exactly why I’m doing my qualification also because I want to share accurate advice with people. And I love to answer my friends and family’s finances questions when I can, so I want to make sure I actually know what I’m talking about.
Anyway, so back to our listener’s question. Ian wants to know how being a fiduciary actually works in the financial planning space. CFPs are a fiduciary, so how does that actually work in practice, Sean?
Sean Pyles:
Yeah, that’s a good question because Ian asked about licensing to affirm that someone is a fiduciary, and in the personal finance space, that usually means getting a CFP certification, which is the gold standard of education and conduct in the financial planning space. So please indulge me as I give you a sip of the Kool-Aid that I’ve been drinking during my CFP coursework, and I’ll explain what it means to be a certified financial planner professional/fiduciary.
Elizabeth Ayoola:
Come on. Tell us, Sean.
Sean Pyles:
Okay. So part of becoming a certified financial planner involves intensive education, passing a difficult exam, but then once you are certified, you have to act according to the Code of Ethics and Standards of Conduct that are outlined by the CFP Board. And there are three parts to this fiduciary duty that is also outlined by the Standard of Conduct.
So first, there’s a duty of loyalty, which states that a CFP professional has to put their client’s interests ahead of their own, like we talked about before. They also have to avoid, disclose, and manage conflicts of interest, and they must only act in the financial interest of the client, not themselves or the firm that they work for. They also have a duty of care, which basically mandates that the CFP professional has to be competent and do their best to help their clients meet their financial goals. Also, they have a duty to follow client instructions, where a CFP professional has to abide by the terms of the engagement with their clients.
Elizabeth Ayoola:
Wow, that is a lot, but honestly, it would give me confidence as a client to know that someone jumped through all those hoops for me.
Sean Pyles:
Yeah, and that’s really just scratching the surface, too. And the Standard of Conduct is a big part of why being a CFP is a big deal in the personal finance space.
Elizabeth Ayoola:
But here’s the thing, Sean, our listener, and to be honest, me too, is also wondering about enforcement. So let’s say a CFP professional decides to prioritize them making an extra dollar over what’s best for the client, and I don’t know, let’s say they push them into an investment or some kind of insurance product that isn’t actually a good fit for the client. What happens then? Do they call the cops? What do we do?
Sean Pyles:
The police are not involved in this unfortunately, but there is an enforcement mechanism at the CFP Board. If someone suspects that a CFP isn’t living up to their fiduciary responsibilities, they can file a complaint with the board and the board will investigate, and there are a number of disciplinary actions that it could take, including stripping someone of their certification.
The thing is, the onus is typically on the clients to file the complaints, and that’s part of why hiring a financial professional, hiring a CFP doesn’t mean that you can totally sit back and ignore your money. You still have to be engaged and monitor what’s going on.
Elizabeth Ayoola:
For sure, I learned that the hard way, so I try to learn things here and there. But thanks for explaining that.
I do have another question though. How would the client even know if they aren’t financially savvy or if they have a sketchy history? Are there some telltale signs?
Sean Pyles:
Yeah, this is the really tricky part, right? You’re going to this financial professional because of their expertise, so they probably know more about this topic than you do, and that can make it hard to know if they are BSing you or maybe more likely to violate their ethical duty later on. There are a couple of things that you can do though.
Before you even hire a financial professional, do your due diligence and shop around. I would recommend talking with a few different financial advisors before you decide which one you want to work with long-term. You can think of it like dating in that way. You want to get to know them and feel that you can trust them. And then once you are in this vetting process, I would say turn to our old friend Google and dig into each planner that you’re considering a little bit, like you would anyone that you’re dating. Verify that they actually have the certification that they say they do, and look and see if they’ve had any disciplinary actions that have been marked against them publicly. Also, you can just Google around and see if they’ve done anything else that you find suspicious or weird that you just aren’t on board with.
Elizabeth Ayoola:
Wow. I love those tips, Sean. And I also must say, when you said, “Your old friend Google,” it just reminded me about how long I’ve been in a long-term relationship with Google, but the tip’s definitely way more important. So basically, you’re telling us to put our investigator hat on. So okay, what’s the other thing you think people should do?
Sean Pyles:
Okay, so this might sound a little bit squishy, but go with your gut. If you talk with someone enough, you can probably tell if they aren’t confident in their grasp of the information they’re presenting. And even if they are, you might find that they just have a different money philosophy from you, which can signal that you guys are not compatible. For example, I once worked with a financial planner who suggested that I could take a 401(k) loan to solve a short-term cashflow issue that I had. And I personally happened to think that taking a loan against my own retirement for a problem that was going to work itself out anyway was an exceptionally bad idea, so I decided to work with another financial planner instead from that point on.
Elizabeth Ayoola:
Wow, that advice does not sound good, especially if it was suggested before exploring other alternatives that may not set you back for retirement. And I do understand that some people have to take out a loan against their 401(k), and that’s the only option that they have, but the downside is it might set you back, but I’m glad you went with your gut.
Sean Pyles:
Right. It wasn’t right from my circumstances or how I like to manage my money, and that’s what the bottom line was for me.
Now, so far, Elizabeth, we’ve been talking a lot about CFPs because that really is going to be the primary type of fiduciary that a lot of people looking for financial planning will encounter, but I want to go back to the idea that there are a lot of other people out there giving personal finance advice.
Elizabeth Ayoola:
Mm-hmm. People on TikTok, your nosy friends who are always getting in your business, the people interrupting my YouTube videos with their long-winded ads.
Sean Pyles:
Yes, but also accredited financial coaches and certified financial therapists. Both of those are fiduciaries, but they have different standards of conduct and enforcement mechanisms.
Elizabeth, I know that you have some experience working with financial therapists, so can you give us the rundown on what they do and why someone might benefit from working with one?
Elizabeth Ayoola:
I do, I do have experience with that, Sean. I am a wellness fanatic, that’s just a personal note, so I love the topic of financial therapy and also financial wellness. So essentially a financial therapist can help investors understand their worries and their fears around money. They also help you identify the feelings and the beliefs that you have around your money and your habits. Another way to put it is they help you identify and eliminate your money blocks, which are things getting in the way of you achieving your financial goals.
Sean Pyles:
And financial coaches are somewhere between a CFP and a financial therapist. They help people meet their financial goals, and they might be better suited to help those who aren’t super high-net-worth, don’t have a lot of investable assets. Accredited financial coaches also have a specific focus on diversity, equity, and inclusion, which is really important in the personal finance space, considering the racial and gender financial inequity in this country.
Elizabeth Ayoola:
Absolutely. They’re doing good work and we have a lot of work to do to close the gap, but as a woman and a Black woman at that, I hope we see more progress in coming years.
Sean Pyles:
So we’ve just run through a few different types of fiduciary financial professionals, and here’s my bottom line: if you are getting individualized financial advice, it’s probably for the best if that person is also a fiduciary because you know that that is a stamp of credibility, and it goes way beyond a financial influencer on TikTok telling you to sign up for their class and then peddling some investment account from a company that’s really just bankrolling their lifestyle.
Elizabeth Ayoola:
1,000%. I know me personally, I’m at a point where I’m growing wealth and I’m trying to make the right investment choices so I can see positive growth in the coming years. On that note, I would definitely go to a fiduciary if I was stuck trying to make a tough financial decision.
Sean Pyles:
Yeah. At the least, when you are receiving financial advice from someone, whether in person, on social media, or even on a podcast, I think people should ask themselves three questions: what is this person’s qualifications, how are they getting paid, and why are they doing this?
Elizabeth Ayoola:
I definitely think more people should ask those questions. But Sean, say more about that money part because that’s a big piece of the puzzle too.
Sean Pyles:
Yeah. Well, in the financial planning space, there are three main ways that people are compensated beyond a base salary. They can be fee-only, fee-based, and commission-based.
So when you meet with a fee-only advisor, they might charge you an hourly fee or a fee based on a certain percentage of your assets that they’re managing, maybe 1 or 2%. That’s pretty common. And fee-based is really similar, but there is a key difference, and that is that this advisor might get a commission from products that they sell you, like an insurance product or a specific investment account. And commission-based is exactly that: the advisor makes their money from selling financial products. So you can probably imagine why the commission-based pay structure gives some people pause.
Elizabeth Ayoola:
For sure. And then even if the advisor is a fiduciary, being commission-based could muddy the waters a little bit.
Sean Pyles:
Yeah. And for those who are really concerned about any conflicts of interest in the financial advisor space, fee-only might be the route where they feel most comfortable.
Elizabeth Ayoola:
Well, Sean, thank you for this rundown of what it means to be a fiduciary. Your coursework is courseworking, and I can see the studying is paying off. Do you have any final words?
Sean Pyles:
Yeah. I’d say that if you want a financial professional to help you with your finances, vet them thoroughly, shop around, and remember that at the end of the day, you have to be your own best advocate to get what you want from your money.
Elizabeth Ayoola:
Absolutely. And that’s all we have for this episode. Sean, thank you for educating we the people. Remember, we are here for you and we want to hear your money questions to help you make smarter financial decisions, so turn to the Nerds and call or text us your questions at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected], and also visit nerdwallet.com/podcast for more information on this particular episode. And remember to follow, rate, and review us wherever you’re getting this podcast.
Sean Pyles:
This episode was produced by Tess Vigeland and me. Sara Brink mixed our audio. And a big thank you to NerdWallet’s editors for all their help.
And here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Elizabeth Ayoola:
And with that said, until next time, turn to the Nerds.
The number of people living paycheck to paycheck is rising, and not just among low-income workers. One-third of Americans with an annual income of $150,000 or more are struggling to pay their bills and have no money left over for savings. Reasons for this include high housing costs, a lack of financial literacy, and lifestyle creep.
So how do high earners end up living paycheck to paycheck, and what can you do to break the cycle?
What Does Living Paycheck to Paycheck Mean?
Most people expect to earn a “living wage.” The term refers to an income sufficient to afford life’s necessities, including housing, food, healthcare, and child care. That level of income should also allow you to save for an emergency, retirement and other goals to some degree.
When a person lives paycheck to paycheck, they can barely pay basic bills and have nothing left over to save for a rainy day. In the event of a pricey emergency — like a big medical bill or major car repairs — low-income families are financially wiped out.
High earners have more wiggle room. They have the ability to downsize their home or car and find other ways to cut back on expenses.
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Understanding the Paycheck-to-Paycheck Situation
According to a 2023 survey conducted by Payroll.org, 72% of Americans are living paycheck to paycheck, with Baby Boomers the hardest hit. When you are living paycheck to paycheck, as noted above, you have no ability to save. If you go into debt, you may not be able to afford to pay down the debt in a meaningful way.
According to research from MIT, the average living wage for a family of four (two working adults with two children) in the U.S. in 2022 was $25.02 per hour before taxes, or $104,077.70 per year. Compare that to the federal minimum wage of $7.25. Even in Washington, D.C., which has the highest minimum wage at $17, families make well below what is considered an adequate income.
But even households bringing in $200,000 or more say they feel the crunch. According to a Forbes study, 39% of those earning at least $200K described themselves as running out of money and not having anything left over after covering expenses. While they have the freedom to downsize their lifestyle, many people may not realize the precariousness of their financial situation until they’re locked into a mortgage and car payments they cannot afford.
Why Do Some Americans Live Paycheck to Paycheck?
The reasons why Americans live paycheck to paycheck vary. For lower-income workers, you can point to a higher cost of living and wages that have not kept up with inflation. For those with higher incomes, the issue is more about a lack of financial literacy and living beyond one’s means.
Rising Cost of Living
According to the Federal Reserve, 40% of adults spent more in 2022 than they did in 2021. They spent more because monthly expenses, such as rent, mortgage payments, food, and utilities had all increased.
Low Income
Low incomes are another reason some people live paycheck to paycheck. This is particularly the case for people who earn minimum wage or live in areas with a high cost of living.
Poor Budgeting
Another reason some people are living paycheck to paycheck is that they lack basic financial knowledge and budgeting skills. It’s easy to overspend and accumulate credit card debt, but difficult to pay down the principal and interest. 💡 Quick Tip: When you have questions about what you can and can’t afford, a free budget app can show you the answer. With no guilt trip or hourly fee.
Lifestyle Creep
Also known as lifestyle inflation, lifestyle creep happens when discretionary expenses increase as disposable income increases. In plain English: You get a raise and treat yourself to a new ’fit. And a fancy haircut. And a weekend at a charming B&B in the countryside.
Whether you can afford it is debatable. On one hand, you may be paying your credit card bill in full each month. On the other, you’re not saving or investing that money.
Factors Driving Financial Insecurity for Six-Figure Earners
Because of inflation, it is increasingly hard to buy a home, car, and other nice-to-haves. However, people may still expect and try to afford these things once they earn a certain amount. And if they have a taste for luxury items, they may struggle to maintain that standard of living and pay their bills.
It’s common for people to buy things on credit and then find that they cannot make the payments. Soon, they find themselves mired in high-interest debt.
How to Stop Living Paycheck to Paycheck
You can stop living paycheck to paycheck by living below your means rather than beyond your means. That requires earning more than you spend and saving the difference. The obvious steps to take are to increase your income and to live more frugally.
Once you have downsized your lifestyle, you can find relief quicker than you might think. And some changes may only be temporary. For example, you might have to work a part-time job for a short time until your debt is paid off.
Tips for Those Living Paycheck to Paycheck
Here are some changes you can make to get on the path to living below your means.
1. Create a Budget
You have to know where your money is going before you can cut back. By tracking your expenses, you can see what you are spending where. There are lots of ways to automate your finances and make it much easier to stay on top of things.
Then, create a budget where you subtract your non-negotiable expenses, or needs, from your net income. Non-negotiables are your housing costs, utilities, food, and transportation. Hopefully, you have some money left over to allocate to savings. If not, it’s time to look at how you can make your life more affordable.
Here are a few budget strategies to try:
• Line-item budget
• 50/30/20 method
• Envelope method
2. Cut Back on Nonessentials
Budgeting will help you find expenses that you can eliminate or reduce. For example, look closely at things that might seem insignificant. You are not necessarily bad with money just because you lose track of subscription services that you have forgotten about.
Be aware that a large cold brew on your way to work every morning can add up, and eating out or spending $30 on takeout each week adds up to over $1,500 annually. More consequential changes are downsizing your home, accepting a roommate temporarily, or finding a part-time gig to supplement your income.
3. Pay Off Your Debt
Debt is expensive. High-interest credit card debt and buy-now-pay-later (BNPL) schemes can eat up your income as you struggle to pay the minimum while the interest mounts up. Consider using a personal loan to consolidate debt and reduce the interest you’re paying.
4. Save for Emergencies
If you are living paycheck to paycheck, just one unexpected expense can cause you to spiral into debt. It’s important to have enough cash on hand. Once you have paid off your debt, start an emergency fund so that you don’t have to rely on credit if you experience an unexpected financial emergency. A rule of thumb is to have three to six months’ worth of expenses saved up. 💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.
5. Hold Off on Big Purchases
While you are trying to reduce expenses and pay off debt, hold off on buying big ticket items. For example, forgo an expensive vacation for a year and start saving toward next year instead. As much as you might like new furniture or a new car, try to economize for a while until you are in a better place financially.
6. Ask for a Raise
Asking for a raise is not an easy thing to do when money is tight. However, it could be well worth it. According to Payscale.com, 70% of survey respondents who asked for a raise got one. You are in a particularly strong position if your skills are in demand and your employer values you.
The Takeaway
Many Americans are living paycheck to paycheck, even high earners. The reasons why are linked to inflation, lifestyle expectations, and the ease with which people fall into debt. The remedy is to live below your means, and that often means making sacrifices.
If debt is a concern, temporary steps such as downsizing while you pay off your debt or finding additional sources of income are options. Identify where your money goes and stick to a budget to reduce unnecessary spending. Also, getting rid of high-interest debt and cutting back on eating out and other nonessentials can free up a significant amount of cash each month.
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FAQ
Does living paycheck to paycheck mean you’re poor?
Living paycheck to paycheck does not necessarily mean that you are poor, but it does mean that you are living beyond your means. Even high earners can find themselves in a position where they are living paycheck to paycheck, often due to mounting debt and lifestyle creep.
Lifestyle creep is when people spend more whenever their income increases. According to a Forbes study, 39% of those earning $200,000 or more described themselves as running out of money and not having enough leftover to save after covering expenses.
Is living paycheck to paycheck stressful?
Yes. When you live paycheck to paycheck, you may constantly worry how you will afford to pay for an emergency. It’s important to have an emergency fund, so that you do not have to use a loan or high-interest credit card to pay for something unexpected.
How many americans are living paycheck to paycheck?
Close to 80% of Americans are living paycheck to paycheck and are struggling to meet their monthly bills, according to a 2023 survey by Payroll.org. That’s an increase of 6% from the previous year.
Photo credit: iStock/Jacob Wackerhausen
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As the temperatures rise and flowers begin to bloom, it’s the perfect time to breathe new life into your home with the latest spring decor trends. Whether you’re looking to add a pop of color, add natural elements, or simply refresh your space, we’ve got you covered with this guide to trending spring decor.
Embrace Soft Pastels
Welcome in the soft, warm colors of spring. Pastel shades such as blush pink, soft lavender, and baby blue are perfect for adding a fresh and airy feel to any room. Consider incorporating these colors through accent pillows, throws, or artwork to instantly lift the mood in your space.
Bring the Outdoors In
Embrace nature by incorporating natural elements into your decor. Think lush greenery, botanical prints, and earthy textures like rattan and jute. Hanging planters, potted succulents, and botanical-inspired wallpaper can help create a sense of serenity.
Play with Patterns
Add visual interest to your space by mixing and matching different patterns. From bold florals to geometric designs, experimenting with patterns can add depth and personality to any room. Try layering patterned rugs, mixing throw pillows, or introducing patterned wallpaper for a more eclectic look.
Opt for Light and Airy Fabrics
Say goodbye to your heavy drapes and opt for lightweight fabrics that allow natural light to filter through. Sheer curtains, linen upholstery, and cotton throws are perfect for creating an airy atmosphere. Not only do these fabrics add texture to your space, but they also help create a sense of openness.
Incorporate Sustainable Elements
With a growing emphasis on sustainability, eco-friendly decor is more popular than ever. Look for furniture and accessories made from sustainable materials such as reclaimed wood, bamboo, or recycled glass. Not only will you be reducing your environmental impact, but you’ll also be adding a unique touch to your space.
Add a Touch of Charm
Inject a sense of playfulness into your decor with unique accents and unexpected details. Whether it’s a fun vase, a vibrant piece of artwork, or a bright accent pillow, don’t be afraid to let your personality shine through. These unexpected touches can add character and charm to your space.
It’s time to nurture nature with an eco-friendly home life.
In our fast-paced modern world, where technology reigns supreme and convenience is king, it’s easy to lose touch with the natural rhythms of the earth. But as we become increasingly aware of the impact of our actions on the environment, many of us are turning towards eco-friendly living not just for the planet’s sake, but for our own well-being too. Let’s explore how adopting a more sustainable lifestyle can not only benefit the environment but also improve our sleep and energy levels.
Exploring the connection: Sleep, energy, and the eco-friendly home
Sleep is a fundamental aspect of our health and well-being, yet many of us struggle to get enough quality rest each night. Likewise, low energy levels have become a common complaint in our caffeine-fueled society. But what does this have to do with the environment?
The answer lies in the intricate connection between our bodies and the world around us. Our sleep-wake cycle, also known as the circadian rhythm, is regulated by environmental cues such as light and temperature. When we disrupt these natural cues with artificial lights, electronic devices, and erratic schedules, we throw our circadian rhythm out of balance, leading to sleep disturbances and fatigue.
Furthermore, our energy levels are closely tied to our overall health and vitality, which in turn are influenced by the air we breathe, the food we eat, and the products we use. By prioritizing eco-friendly practices, we not only reduce our carbon footprint but also create a healthier environment for ourselves to thrive in.
Sustainable sleep practices
One of the first steps towards enhancing sleep and energy levels is to create a sleep-friendly environment. This means optimizing our surroundings to promote relaxation and restfulness. Here are some eco-friendly home tips to transform your bedroom into a sanctuary for sleep:
Natural materials: James Higgins, founder of Ethical Bedding, shares material matters. “Mindful purchasing and consumption means researching the companies you buy from,” Higgins notes. “Always choose organic (and plastic-free) wherever possible even if this means spending more. Spending a little more on higher quality products that are built to last will pay off in the long run.” Following Higgins’s advice and choosing organic bedding made from materials such as cotton, bamboo, eucalyptus, silk, or linen, which are not only gentle on the environment but also breathable and comfortable for sleep.
Chemical-free products: Avoid harsh chemicals and synthetic fragrances in your bedroom cleaning products and personal care items. Opt for natural alternatives to reduce exposure to harmful toxins that can disrupt sleep.
Mindful lighting: Embrace natural light during the day and minimize artificial light exposure at night, especially blue light from screens, which can interfere with melatonin production and disrupt sleep patterns.
Indoor plants: Incorporate indoor plants into your bedroom decor to improve air quality and create a calming atmosphere. Plants such as lavender, jasmine, and snake plants are known for their sleep-promoting properties.
Energy-efficient appliances: Invest in energy-efficient appliances and electronics to reduce energy consumption and minimize environmental impact. Hsin, with Nanani World, recommends this especially when it comes to lighting. “Switching to LED lighting from conventional incandescent bulbs can reduce energy consumption. LED bulbs last longer and are essential for lowering carbon emissions, which promotes environmental sustainability,” Hsin shares. Specifically, red LED lighting can enhance sleep quality and promote a quicker falling-asleep process, studies have found.
Disconnect from screens: Power down electronic devices at least an hour before bedtime to allow your mind to unwind and prepare for sleep. Sharon Bonner with Bright Ideas Event Agency shares her biggest wind-down tips. “No screen time 90 minutes before sleep and when sleeping, put devices in a Faraday bag to remove potential distraction,” Bonner shares.
Energize your day with sustainable living
Beyond improving sleep quality, adopting an eco-friendly lifestyle can also boost your energy levels and overall well-being. Here are some ways to energize your day while reducing your environmental impact:
Consider a plant-based diet: Incorporate more plant-based foods into your diet, such as fruits, vegetables, whole grains, and legumes. Plant-based diets are not only environmentally sustainable but also rich in nutrients that can increase energy levels and support overall health.Caroline James, with Envirolineblog.com, shares how to further make the most out of your meals. “Sometimes people think that being eco-friendly is more expensive. However, one of my favorite sustainable tips is to plan your meals and write a shopping list at the same time,” James explains. “Something as simple as writing a shopping list helps reduce food waste by assessing what you already have rather than impulse buying. Planning your meals also saves you money when you don’t overbuy and inevitably throw food away.”
Stay hydrated: Drink plenty of water throughout the day to stay hydrated and maintain optimal energy levels. Invest in a reusable water bottle to reduce plastic waste and minimize your carbon footprint.
Re-read labels: A lot of household products are toxic and can negatively affect our health. Rachel Lincoln Sarnoff, former journalist and founder of Mommy Greenest, explains the dangers of certain household items. “When it comes to air freshening and candles (and cleaners, for that matter), avoid artificial fragrances, which can contain hundreds of chemical ingredients including phthalates linked to hormone disruption,” Sarnoff warns. “Unless a label lists the components of what scents the product — such as essential oils—then the word “fragrance” probably means it’s artificial.”Another household item to reconsider is non-stick pans. “[Non-stick pans] are coated with PFOAs that can be harmful to human health,” Sarnoff explains. “If you can’t afford to overhaul your set, start with those that are scratched, which are more likely to leach these toxic chemicals into your food, and replace pans with metal versions that don’t have a non-stick coating. You can have the pans sand-blasted down to a stainless steel base and either continue to use or recycle them.”
Get moving outdoors: Take advantage of the natural world around you by engaging in outdoor activities such as hiking, cycling, or gardening. Spending time in nature can reduce stress, increase energy levels, and foster a deeper connection to the environment.
Reduce, reuse, and recycle: Practice the three R’s of sustainability — reduce, reuse, and recycle — to minimize waste and conserve valuable resources. Valinda, founder of Green and Happy Mom, explains that opting for what you already own is the most eco-friendly choice. “Why buy a stainless steel bottle if your trusty plastic one still serves its purpose? The same principle applies to food containers, bags, and more. When considering a new purchase, explore secondhand options first, ” Valinda concludes. “Not only does this reduce the demand for new resources, but it also helps you save some money.” Emma Reed suggests finding reusable alternatives first and investing in them. “Whether that be reusable wipes for the home, a reusable coffee cup you can take out with you, reusable nappies/diapers for your baby, or beeswax wraps instead of clingfilm, there are many doable and handy options, Reed shares. “On top of being more environmentally friendly, they are also much kinder to your wallet too – it’s a win-win.”
Eco-friendly home: Other ways to cultivate a green oasis
Incorporating eco-friendly practices into every aspect of your home life can have a significant impact on both the environment and your well-being. Here are some overarching green living tips to help you reduce your carbon footprint and create a more sustainable living space:
Simple swaps: Jennifer Young with What’s Good suggests starting with swaps that impact your health first. “For example, your skin is your largest organ and absorbs 70% of what it comes in contact with — your feet absorb 100%! This means the first change is laundry, like clothing, sheets, and towels. Ditch the big plastic bottle laundry detergent and start using concentrated laundry strips or powders,” Young shares. “Both are plastic- and liquid-free which hugely reduces fossil fuel consumption. Plus, there are no synthetic fragrances, dyes, or other harmful chemicals that might interrupt your endocrine system or aggravate your skin. You can further protect your health and save energy by using dryer balls instead of dryer sheets or fabric softener.”Yalu Xu, with Momo Lifestyle, echoes this sentiment that embracing eco-friendly living starts with reevaluating household essentials. “There’s room for sustainability in unexpected areas, like bath mats. Traditional fabric bath mats require weekly washes, using over 2,000 liters of water each year, ” Yalu Xu shares.
“An innovative alternative is a product like Drytomita bath mat. Made from diatomaceous earth, these mats not only absorb and evaporate water quickly but also maintain their cleanliness and functionality like new for years, with simple sandpaper maintenance. It’s a testament to how sustainable choices can seamlessly integrate into, and enhance our daily lives.”Another simple swap, shared by Lamar with BRoadout is opting for reusable alternatives like cotton and choosing sustainable materials like bamboo. “Cotton and bamboo are both sustainable choices and both hold a pivotal role as one of our primary raw materials, featured in a wide array of products, Lamar explains. “Choosing sustainable cotton items for your home, like tents and chairs, or bamboo items like tables, is a thoughtful way to care for your loved ones and the environment.” Lastly, Alyssa Bolaños, founder and CEO of Oh-Eco.com, reminds us not to feel pressure to make all the swaps at once. “My number one tip for living more sustainably is to use what you have, then, get what you need – just the sustainable version,” Bolaños states. “As you run out of your household cleaners or items, swap them for a more sustainable version on your next shopping trip. So instead of a plastic toothbrush, switch to bamboo. Or instead of saran wrap, maybe reusable bowl covers or beeswax wraps. You don’t have to change everything overnight.”
Consider air purifying measures: Jen Stout, co-founder of Healthier Homes, explains the importance of air purifying measures. “Adding a portable air filtration system with UV/ion purification in your living and bedroom areas is well worth the investment,” Stout exclaims. “Something many don’t think about either is paint – look for paints that seal the surface and are zero VOC, to add beauty and color to your space, while keeping the air condition pristine.” Houseplants can also help filter toxins, add oxygen to the air, and contribute to healthy sleep.
Energy efficiency: Ecoclicky support team encourages homeowners to consider renewable energy sources. “Install solar panels to harness solar energy, reducing reliance on non-renewable power sources,” the team shares. “For those unable to install panels, choosing energy providers that offer green energy plans can be a great alternative.” The team also advises upgrading to energy-efficient appliances and LED lighting. “This cuts down on electricity usage along with remembering to unplug devices when not in use,” the Ecoclicky team notes.
By incorporating these overall green living tips into your home, you can create a more eco-friendly environment that benefits both your health and the planet.
Simplifying conserving and preserving the earth
As we reflect on our relationship with the planet, let’s remember that our actions not only shape the world around us but also impact our health and well-being. By embracing eco-friendly living practices, we can enhance our sleep and energy levels while safeguarding the environment for future generations. So, let’s commit to treading lightly on the earth and nurturing a sustainable lifestyle that benefits both ourselves and the planet we call home.
Wesley is a Charlotte-based writer with a degree in Mass Communication from the University of South Carolina. Her background includes 6 years in non-profit communication and 4 years in editorial writing. She’s passionate about traveling, volunteering, cooking and drinking her morning iced coffee. When she’s not writing, you can find her relaxing with family or exploring Charlotte with her friends.
Retirement at 65 has been a longstanding norm for U.S. workers, but older investors believe that not only is such an outcome unfeasible, but they’re likely to face more challenging retirements than their parents or grandparents.
This is according to recently released survey results from Nationwide, with a respondent pool that included 518 financial advisers and professionals, as well as 2,346 investors ages 18 and older with investable assets of $10,000 or more. The survey follows other ongoing research into the baby boomer generation as it approaches “Peak 65.”
The investors included a subset of 391 “pre-retirees“ between the ages of 55 and 65 who are not retired, along with subsets of 346 single women and 726 married women, Nationwide explained of its methodology.
Seven in 10 of the pre-retiree investors said that the norm of retirement at age 65 “doesn’t apply to them,” while 67% of this cohort also believe that their own retirement challenges will outweigh those of preceding generations.
Stress is changing the perceptions of retired life, especially for those who are closest to retirement, the results suggest.
“Four in 10 (41%) pre-retirees said they would continue working in retirement to supplement their income out of necessity, and more than a quarter (27%) plan to live frugally to fund their retirement goals,” the results explained. “What’s more, pre-retirees say their plans to retire have changed over the last 12 months, with 22% expecting to retire later than planned.”
Eric Henderson, president of Nationwide Annuity, said that previous generations who observed a “smooth transition” into retired life do not appear to be translating to the current generation making the same move.
“Today’s investors are having a tougher time picturing that for themselves as they grapple with inflation and concerns about running out of money in retirement,” Henderson said in a statement.
The result is that more pre-retirees are changing their spending habits and aiming to live more inexpensively. Forty-two percent of the surveyed pre-retiree cohort agreed with the idea that managing day-to-day expenses has grown more challenging due to rising costs of living, while 27% attributed inflation as the key reason they are saving less for retirement today.
Fifty-seven percent of respondents said that inflation “poses the most immediate challenge to their retirement portfolio over the next 12 months,” while 41% said they were avoiding unnecessary expenses like vacations and leisure shopping.
Confidence in the U.S. Social Security program has also fallen, the survey found.
“Lack of confidence in the viability of Social Security upon retirement (38%) is a significant factor influencing pre-retirees to rethink or redefine their retirement planning strategies,” the results explained. “Over two-fifths (43%) are not counting on Social Security benefits as much as previously expected, and more than a quarter (27%) expect to receive less in benefits than previously anticipated.”
The survey was conducted by The Harris Poll on behalf of Nationwide in January 2024.
Whether it’s going to bed before midnight, eating broccoli, or dealing with your finances, doing the “right” thing can sometimes feel like a herculean effort.
Similar to an erratic sleep schedule or an aversion to eating green things, there are consequences to delaying wise financial moves. If you avoid creating a budget, putting your bills on autopay or learning how to invest, your financial life may become more stressful.
But knowing something is good for you isn’t always enough to make you do it. Many people have complicated feelings around money, and for good reason. Getting to the bottom of those feelings may be the most effective way to deal with avoidant tendencies.
Uncovering your financial beliefs
To get to the root of your financial anxieties, it may be helpful to learn about your “money scripts,” a term that’s a registered trademark of the Financial Psychology Institute. Money scripts are what financial therapists call the unconscious beliefs we hold about money. Often, these beliefs are rooted in our childhood and continue to shape our financial lives as adults.
Rick Kahler, a certified financial therapist and founder of the Kahler Financial Group in Rapid City, South Dakota, had one client who struggled to save despite being a high-earning professional. Through several interviews, Kahler learned that the client’s parents had filed for bankruptcy when she was a child, and in the process, she lost her own savings.
“She just knew that all her money that she worked hard to save disappeared. And so the lesson she took away from that was ‘don’t save money, because it will disappear,’” says Kahler.
Georgia Lee Hussey, a certified financial planner and founder of Modernist Financial, a B Corp wealth management firm in Portland, Oregon, says that taking what may seem to be a logical step, such as investing just a small amount, before unearthing your deeper emotions may sometimes do more harm than good.
“The small step to get closer to the logical action is actually a reinforcement of the mega story,” says Hussey.
Tools you can use
While uncovering your money scripts may feel daunting, there are a lot of tools out there that can help you get started. You can take the Klontz Money Script Inventory-Revised (KMSI-R), which is a free short quiz that helps you identify your dominant money scripts and offers actionable advice. The KMSI-R evaluation is offered by Your Mental Wealth Advisors, a financial advisor firm based in Burlingame, California, that focuses on overall financial health. Hussey’s firm offers a similar reflective experience you can download for free that can help you facilitate a conversation about your money history.
And if you’re able, it may be worth working with a financial therapist in conjunction with these tools.
“Working with a financial therapist can really help,” says Kahler. “But if a person doesn’t want to do that, they may want to employ journaling or mindfulness meditation that is specifically geared to money scripts. But typically, people can make pretty good progress in really focusing on their personal situation, and a financial therapist can help with that.”
Be ok with baby steps
After doing some deep work on your money story, and on how your long-held beliefs came to be, you may be feeling ready to take some small steps toward a better financial future.
A few baby steps you can consider could include moving your money into a high-yield savings account instead of a standard savings account. If you have a 401(k) with an employer match, you could also look into contributing enough to receive that match.
But be ready for those old stories to come up, because even an account type like a 401(k) may become an emotional stumbling block.
“One of my favorites from the Great Recession is, ‘I’m not going to invest in a 401(k) because my uncle lost all of his money in his 401(k),’” says Hussey. “It wasn’t the 401(k) that was the problem. It was your uncle, who in the middle of the night got freaked out and sold everything in his 401(k) at the bottom of the market. That’s actually what was wrong. It was the human making an emotional decision. The 401(k) itself is just a tax wrapper. It has no personality. It doesn’t do things to anybody. So let’s unpack what that story is about.”
Hussey encourages people to deeply investigate where the stories they’ve heard about investing came from.
“I think those kinds of questions like, ‘What am I telling myself? Where’s it coming from? Who told it? What was the location I heard that? Where do you think they heard that from?’ That’s how we start to unpack these stories about investing and saving,” says Hussey.
This article was written by NerdWallet and was originally published by The Associated Press.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
American spending habits fluctuate by generation. In 2023, Gen Z spent most of their money on food and clothes while baby boomers prioritized healthcare.
American spending habits fluctuate based on factors like the economy, average cost of living and global events. Interestingly, spending trends don’t always move in predictable patterns—NPR reported elevated spending in 2023 despite rising inflation costs.
Here, we’ll review American spending habits to paint a clearer picture of our potential expenses in the near future. We’ll also share personal finance resources that can help you refine your budget and reach your savings goals.
Table of contents:
Overview of American spending habits
According to the Bureau of Labor Statistics (BLS), Americans spent an average of $72,967 in 2022. This number suggests a 9 percent increase in American spending habits from 2021 (wherein the average annual expenditure was $66,400) to 2022. How much we spend makes a lot more sense when we break down what exactly our money is going toward.
What do Americans spend the most money on?
Expenditure
Cost
Housing
$24,298
Transportation
$12,295
Food
$9,343
Personal Insurance and Pensions
$8,742
Healthcare
$5,850
Entertainment
$3,458
All Other Expenditures
$2,080
Cash Contributions
$2,755
Apparel and Services
$1,945
Education
$1,335
Personal Care Products and Services
$866
Source: Bureau of Labor Statistics
In 2022, the BLS noted a 7.5 percent increase in income to coincide with a 9 percent increase in expenditures. Among the different categories, spending on food increased by 12.7 percent from 2021 to 2022. Vehicle purchases and entertainment expenses dropped by 6.9 percent and 3.1 percent, respectively.
These numbers fluctuate depending on the circumstances of a particular household. For example, the BLS found that 39.4 percent of a one-person household’s expenses go toward housing costs, while 32.1 percent of a two-person household’s funds are spent on housing.
To better understand American spending habits, we can examine the average expenditures of various groups based on factors such as age and education.
Teen spending habits
According to the United States Census Bureau, more than 43 million teenagers live in America. Gaining a better understanding of teen spending habits is important, as teens spend about $63 billion each year.
More than 50 percent of young adults (16 to 24) were employed in 2023. Some of the top brands that teens spend their new income on include Chick-fil-A, Netflix and Snapchat. In 2024, the BLS anticipates that more teenagers will prioritize school attendance over traditional means of employment—which could affect where and how often they’re spending money.
College student spending habits
College student spending habits fluctuate as changes to the American education system become more widespread. Four years in college is no longer the norm—many students take anywhere between an extra semester to a few extra years to graduate. This extra time incurs additional costs (like tuition and rent) that impact spending habits.
In addition to money spent on tuition, college students are purchasing new tech, tickets to festivals and events and lots of food. Older students with more life experience also have to balance school expenses with other mandatory purchases like groceries for the household.
Gen Z spending habits
Generation Z includes anyone born between 1997 and 2012. Gen Z spending habits reportedly differ even more than their older millennial counterparts. This generation grew up completely immersed in the digital era and is very likely to shop online.
A 2021 study by Elmira Djafarova and Tamar Bowes found that 41 percent of Gen Zers are impulse buyers. Quality and value are of the utmost importance to this generation. They may be quick to switch brands if they believe they’re getting better overall value from a different company.
Millennial spending habits
Millennials are generally defined as the generation born between 1981 and 1996. This group is known for making financial decisions that are strikingly different from those that came before them.
Millennial spending habits include increased online shopping, a preference for experiences over material things and an openness to generic brands if the choice saves money.
Baby boomer spending habits
Baby boomers are those born between 1946 and 1964. This group is filled with people who are close to or already in their retirement years. In contrast to their parents, who were born in the Great Depression, boomers expect to have a fun retirement.
They’re looking forward to experiencing new places and trying new things. However, many baby boomers are facing retirement issues due to a lack of savings and mounting debt. Despite it all, baby boomer spending habits indicate that this generation holds more than 50 percent of the wealth in the United States.
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Supervising Attorney
Alexis Peacock was born in Santa Cruz, California and raised in Scottsdale, Arizona.
In 2013, she earned her Bachelor of Science in Criminal Justice and Criminology, graduating cum laude from Arizona State University. Ms. Peacock received her Juris Doctor from Arizona Summit Law School and graduated in 2016. Prior to joining Lexington Law Firm, Ms. Peacock worked in Criminal Defense as both a paralegal and practicing attorney. Ms. Peacock represented clients in criminal matters varying from minor traffic infractions to serious felony cases. Alexis is licensed to practice law in Arizona. She is located in the Phoenix office.
Looking for the best jobs that help people? Whether you are looking for a full-time job or a way to make extra income, there are many ways to make money by helping others. Picking a job that matches what you want to achieve personally and lets you help others can feel really good. In lots…
Looking for the best jobs that help people?
Whether you are looking for a full-time job or a way to make extra income, there are many ways to make money by helping others.
Picking a job that matches what you want to achieve personally and lets you help others can feel really good. In lots of different fields, jobs where you can help people have become very popular.
Whether it’s teaching, counseling, healthcare, or responding to emergencies, each job lets you change someone else’s life for the better. If you like the idea of helping out your community and giving assistance to those who need it, there are plenty of rewarding jobs that might be right for you.
Now, that doesn’t mean the jobs below are easy. While you may feel good knowing that you are helping people, many of these jobs are very hard. But, you will know that you are truly helping people and changing the world for the better.
30 Best Jobs That Help People
Below are 30 full-time and part-time jobs helping others in crisis, in your community and at homes.
1. Social worker
If you’re someone who likes to help others, becoming a social worker might be the perfect job for you. Social workers support people who face challenges in their lives. This could mean working with children, families, or even whole communities.
Social workers might work in schools, helping kids and families get through tough times, or in hospitals guiding patients through health challenges.
2. Teacher
A teacher’s job is about more than just giving lessons. The job is to guide and help students understand new information. When you teach, you make a real difference in the lives of your students.
Teachers work in different settings, such as at a public school, private institution, or even provide one-on-one education as a tutor. Some teachers work online too, which is a great option if you’re looking for more flexibility.
You can choose to become a kindergarten teacher, high school teacher, college instructor, or anything in between.
Recommended reading: 36 Best Side Jobs for Teachers To Make Extra Money
3. Nurse
Nurses play an important role in healthcare, helping people feel better and stay healthy.
I have met so many amazing nurses in my life, and it is such a helpful career path. I still very much remember all of the wonderful nurses who helped me when I was in the hospital giving birth to my daughter – these nurses were amazing and helped me so much, and I truly felt like they cared.
Nurses can work from home, in a hospital, or even in a law firm. A similar career path where you can help people is to become a nurse practitioner, with a higher salary and extra responsibilities.
Recommended reading: 27 Best Side Hustles For Nurses To Make Extra Money
4. Personal trainer
If you like staying active and want to help others, becoming a personal trainer could be a great fit for you.
As a personal trainer, you’ll get to work with people every day, helping them achieve their fitness goals. It’s not just about showing exercises; it’s about motivating and guiding people to live healthier lives.
Here are some of the things that personal trainers do:
Create workout plans.
Show people how to exercise correctly.
Keep track of a client’s progress.
Teach clients about healthy lifestyle choices.
Personal trainers are found in places like gyms, fitness centers, and sometimes they can even come to your home. Some trainers lead group classes, while others give one-on-one sessions.
5. Occupational therapist
An occupational therapist (OT) helps people of all ages do different activities that are important for their daily lives, work, school, and leisure. Some examples of occupational therapy include:
Dressing – OTs help individuals in selecting appropriate clothing and developing strategies to independently dress themselves.
Eating – OTs may recommend adaptive equipment or techniques to help individuals with feeding difficulties.
Household chores – They provide strategies to make household chores more manageable for individuals with physical or cognitive limitations.
Job tasks – OTs help individuals develop skills and strategies to perform job duties effectively and safely.
Community integration – They support individuals in participating in community events, clubs, and social gatherings.
As you can see, OTs help people in so many ways.
They work in places like hospitals, schools, or even patients’ homes are common spots for occupational therapists.
6. School counselor
School counselors play a big part in guiding students toward their future.
They help with class schedules, give advice, or plan big steps like going to college or finding a job. This job is important because school counselors help students do their best and feel good about themselves.
They also help in other ways, such as helping students who are going through a hard time in life, like helping them with handling a mental health issue or even dealing with the passing of a parent. They are very much needed in all schools!
7. Substance abuse counselor
Substance abuse counselors help people fight addiction and get their lives back on track. Their job is important because they guide people through tough times, showing them how to stay away from drugs or alcohol and live a healthier life.
They meet with people and listen to their stories, teach them new ways of dealing with problems without using substances, and support them as they make changes to better their lives.
8. Physician
Being a doctor is a way to make a big impact in your community, as everyone knows.
Depending on the specialty, they can check your health, find out what’s wrong when you’re sick, and give you the right medicine to help you feel better.
Doctors are important because they help us when we’re sick and also keep us healthy. They listen to our concerns, offer comfort, and provide treatments. This makes a big impact on many people’s lives every single day.
9. Lawyer
A lawyer’s main job is to protect the legal rights of their clients. This means giving advice based on the law and, sometimes, defending your client in court.
A lawyer might work at a large law firm, for businesses, or for everyday people with different problems. Lawyers tend to specialize in one area of law, like helping injured people, family issues, working with businesses, traffic tickets, and so on.
10. Paramedic
Paramedics are the people who arrive first when there’s a medical emergency.
Their job is to take care of people who are hurt or very sick, right there on the spot or while they’re on the way to the hospital for further treatment. They give first aid and other medical care, stay calm under pressure, and drive an ambulance if needed.
11. Firefighter
Firefighters are trained to fight fires and keep people, buildings, and nature safe. They rescue people and animals from burning buildings, help at accident scenes, and teach the public about staying safe from fires.
This is a tough job that every community needs.
12. Nutritionist
If you like helping people and love everything about food and health, think about becoming a nutritionist! A nutritionist is someone who helps people eat better and live healthier lives.
A nutritionist is a health expert who knows a lot about food and how it affects our bodies. They look at what people eat, their health goals, and make personalized plans to help them eat better. Nutritionists teach people about healthy eating, help with meal plans, and give support to make lasting changes in lifestyle.
They work in different places like schools, hospitals, or their own offices to help people be healthier through good nutrition.
13. Pediatric sleep consultant
Getting enough sleep is super important for babies and their parents. But sometimes, parents have trouble making sure their baby sleeps well.
This can lead to some parents getting nearly no sleep, and it impacts their life, their job, and their mental health.
That’s where pediatric sleep experts come in handy. They know a lot about helping kids sleep better, which helps families have better nights. If you really like working with kids and want to help them, becoming a sleep coach could be a great career option for you.
This is an area that so many parents need so that they can continue living their lives.
For me, I have taken many tips from pediatric sleep consultants so that I could help my child sleep better, and so that I in turn could get sleep as well. These were life-changing tips!
Recommended reading: How To Become A Sleep Consultant And Make $10,000 Each Month
14. Dentist
Dentists work with teeth and gums, and they help keep your mouth healthy as well as fix problems when they come up.
If you have a cavity, they can fill it. Or if you have something more serious, they can fix it too. Dentists tell you how to take care of your teeth so you can keep them strong and avoid future problems.
15. Psychologist
Psychologists help people deal with their feelings and thoughts by listening to people and understanding their problems. They work in schools, offices, and sometimes even online.
They ask questions, do tests, and figure out the best way to help people feel better.
16. Police dispatcher
Being a police dispatcher is an extremely important job that helps people in crisis.
Dispatchers have an important job in keeping communities safe and making sure everything runs smoothly. They answer emergency calls when you call 911 and send out the right help.
17. Police officer
Police officers in law enforcement keep areas safe by stopping crime and making sure laws are followed. They patrol the streets, keep an eye out for any trouble, and if someone calls for help or there’s an accident, police officers are the first to arrive.
A police officer’s work is very important for everyone’s safety. They are trained to handle many kinds of situations.
Some police officers have a degree in criminal justice, but not all have college degrees.
18. Massage therapist
Massage therapists use their skills to help relax tight muscles and ease pain. They work in many places like spas, hospitals, or sports centers.
This is a career path where you can make others feel physically better, relieve stress, and feel relaxed.
19. Speech and language therapist
Speech therapists (also known as speech-language pathologists) help people of all ages overcome difficulties with communication, as well as swallowing disorders.
Speech therapists work with children and adults who face challenges with speaking and understanding others, help those who have trouble eating or swallowing due to health issues, and create fun and engaging exercises to improve clients’ speech and language skills.
Many, many people use speech-language pathologists these days, especially for young children, and it is such a needed career path right now. Many cities have very long waitlists because there simply are not enough speech therapists, so this can be a very helpful career choice to get into.
20. Rehabilitation specialist
Rehabilitation specialists give support to those who need a little extra help due to health troubles like injuries or mental health challenges.
A day in the life of a rehabilitation specialist could include working with kids or adults, helping them with their skills to live a good life (kind of like teaching and cheering on someone as they learn or remember how to do important daily stuff).
These jobs are often found in places like hospitals, private clinics, or community centers.
21. Caregiver
Caregiving roles are very important careers that help people who really need it.
Caregivers play an important role in the lives of those who need help due to age, sickness, or disability. They provide support and company, making a real difference every day.
Caregivers do things like cook meals, drive people places, or just talk to make someone’s day brighter.
22. Home health aide
A home health aide is somewhat similar to a caregiver. Caregivers and home health aides both help people who need support with daily activities because of sickness, disability, or getting older. However, caregivers usually do a wider range of tasks like keeping people company, driving people places, cooking, and doing chores.
Home health aides focus more on personal care, such as helping with bathing, dressing, and reminding about medications. Home health aides often get formal training and might work under a nurse or another healthcare worker, while caregivers might not have formal training and often work on their own or for agencies.
Home health aides have an important job where they help people who need extra care to live comfortably in their homes. People like seniors or those with disabilities count on them to be there for them.
23. Translator
Translators connect people who speak different languages, and this job is important because they help people understand each other.
Translators work in many places. Some work in hospitals, making sure doctors and patients understand one another. Others translate books or websites, so everyone can enjoy stories or information, no matter what language they speak.
Many translation jobs let you work from home. Some jobs are full-time, and some are part-time. You can find what fits your life.
Recommended reading: 28 Ways To Get Paid To Text And Make Money
24. Environmental engineer
Environmental engineers figure out how to keep nature clean and safe. They sometimes work on projects that prevent pollution or create plans to fix damage that’s already been done, like cleaning up oil spills.
25. Pharmacist
Pharmacists know all about medicine, fill doctors’ prescriptions for patients, and explain how to take the medicine safely. This is a job that helps people because people need medicine in order to feel better.
Pharmacists work in pharmacies, drugstores, clinics, and hospitals.
26. Optometrist
Optometrists are eye doctors that help people see better. They check your eyes, find out if you need glasses or contacts, and can spot eye troubles before they become a bigger issue.
Eyes are important, of course, and so this is a job that definitely helps people.
27. Midwife
Becoming a midwife might be a great job for you if you enjoy helping people and have an interest in healthcare. Midwives are healthcare professionals who help women before, during, and after they have a baby.
Midwives work in different places, such as in a hospital, in a clinic, or visiting moms at their homes.
I had a midwife and doctor team for my pregnancy, and the midwife was amazing. She made me feel comfortable and was very friendly and calming.
28. Conservationist
Conservationists get to spend their days outdoors, helping plants and animals survive and stay healthy. They research and learn about different species and find ways for humans to live alongside them without causing harm.
The planet is home to incredible animals and places, but some are at risk. Conservationists help protect these natural wonders and make sure there are plenty of wild areas for animals to thrive in. They also work to keep the air and water clean for everyone to enjoy.
29. Dental hygienist
Dental hygienists are important in preventing and treating oral diseases. It’s more than just cleaning teeth.
They also teach patients how to take care of their mouth, show them the right way to brush and floss, and help them understand why oral health is so important.
30. Blogger
Okay, so I realize that this option is not like any of the rest.
But, I have personally helped thousands of people over the years with my blog, so I think being a blogger definitely helps people. I have received many emails and letters from readers who have said that I helped them pay off their debt, stop living paycheck to paycheck, reach retirement, and more.
With a blog, you can help people understand different topics, learn actionable tips, get motivated to reach their goals, and more.
If you enjoy writing and sharing stories or expertise, becoming a blogger might be right up your alley. A blogger creates content for a blog, which is an online space for posting thoughts, knowledge, and insights.
Your blog can become a helpful resource on topics you’re passionate about. Whether it’s cooking, personal finance, or even traveling, your words could be valuable to someone else.
I started Making Sense of Cents back in 2011. Since then, my blog has made over $5,000,000.
I didn’t plan to make money when I started the blog. It was just a way for me to keep track of my own money journey. At first, I didn’t even know people could make money from blogging or how to make a successful blog!
But after only six months, I started earning money from my blog.
You can learn how to start a blog with my free How To Start a Blog Course (sign up by clicking here).
Frequently Asked Questions
Below are answers to common questions about how to find jobs that help people.
What is the best career to help others?
The best careers to help others include becoming a social worker, teacher, nurse, therapist, counselor, and firefighter.
What job helps people with their money?
Financial planners or advisors help people manage their money effectively. They provide advice on investments, savings, and budgeting to help individuals achieve their financial goals and secure their future financial stability.
What job can I do to make people happy?
Many of the jobs above can help people become happy, such as being a teacher, personal trainer, school counselor, nutritionist, pediatric sleep consultant, psychologist, and massage therapist.
What are some jobs that help people’s mental health?
Mental health counselors and therapists give support and treatment to people dealing with mental illnesses. They play an important part in improving their clients’ emotional and psychological well-being.
What are some creative jobs that help others?
Art therapists help people deal with stress, trauma, or sickness by using creative activities. They combine the healing power of art with counseling techniques to support healing and personal development.
What are jobs that help people in crisis?
Jobs that help people in crisis include substance abuse counselors, social workers, registered nurses, and art therapists.
What are jobs helping others without a degree?
A bachelor’s degree, master’s degree, or doctoral degree is not required for all jobs that help people. For example, home health aides and personal care aides help people with daily tasks and give companionship. Typically, formal education is not required, but training and a caring personality are important to actually help people.
Best Jobs That Help People – Summary
I hope you enjoyed this article on the best jobs that help people.
When you think about jobs that help others, you might think of social work or healthcare right away.
But there’s a wide range of options, including jobs in teaching, therapy, public service, and even technical fields like translation or environmental engineering.
Each of these jobs is important for making our community better and healthier, often by working directly with people to make their lives better. These roles give more than just a paycheck – they give you the satisfaction of knowing that your work helps people outside of the office too.
What do you think are the best jobs that help people and pay well?
In Louisville, home of the world-famous Kentucky Derby, equestrian style and tradition run deep.
“People in Kentucky really embrace equestrian influence because for such a long time we have been surrounded by thoroughbred farms and horse racing,” said Gretchen Rose, owner of Kentucky Rose Designs. “If you live in the Bluegrass State and take a drive into the countryside, you are bound to run across a horse farm. There is a real cultural influence and people tend to romanticize the equestrian theme.”
Creating the warm aesthetic of equestrian chic is not reserved for those who live on horse farms or in country homes. Louisvillians incorporate accents of this comfortable and sophisticated design in every era and style of home.
Commonly featured statement pieces include textured equestrian patterned fabric and artwork, figurines and stable-inspired items such as brass horse bits, buckles, horseshoes and leather accents.
In her own home, Rose decorated the baby nursery with a soft stuffed Chestnut colored rocking horse, and her sitting room is accessorized with a whimsical oil painting of race horses in a pasture.
Louisville residents who don’t decorate with horse-influenced décor inside their homes make an exception in the weeks leading up to the Kentucky Derby, which is traditionally held the first Saturday in May. As the first daffodils begin to open, homeowners across the city adorn their front door with colorful wooden Kentucky Derby-themed jockey silks, race horses and mint julep decorations. Year-round, restaurants, bars and hotels throughout the city are rich with equestrian memorabilia and décor.
While the equestrian aesthetic is popular in the Derby City, it can easily be overdone. Rose keeps a balance by combining locally sourced antiques in her home designs.
“I love to mix old things in with new,” she said. “There are so many antique stores in Kentucky that antiquing has become its own scene. And because there are so many shops across the state, antiques here are reasonably priced.”
Even older than the Kentucky Derby is another local tradition ingrained in the lives and homes of people who live in the Bluegrass State. Bourbon was born in the late 1700s in Kentucky. Today, the mint julep, which is made with bourbon, is the official drink of the Kentucky Derby.
As a design element, while not as strong as the equestrian influences, bourbon culture is important in Louisville, Rose said.
“Horse racing and bourbon are a natural combination,” she said. “It’s an old-school and classic vibe. I’d say think of a speakeasy with tufted leather, bookshelves, stained wood and walls in navy, hunter green, smoky charcoal and even red. These are colors that represent the flavor of bourbon.”
And yes, Rose has worked with clients who want an entire room designed to feel like a speakeasy, complete with a secret entrance accessed through a bookshelf.
“There is a lot of Kentucky culture, history and pride in Louisville,” Rose said.” Those traditions are reflected in the design elements Louisvillians choose to surround themselves with in their homes.”