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A worrying new trend. More and more Americans are withdrawing funds from their (k) retirement accounts for emergencies. A family of four now needs almost $140,000 a year just to survive. New data shows that Americans are saving less money in an attempt to cope with rising costs. Personal savings levels across the country are nearing record lows How are you, Graham? Congratulations guys, and it's official. Americans literally run out of money at the end of the month. Yes, believe it or not, some of the world's biggest corporate executives are warning about the same thing about the U.S. economy: consumers are so exhausted
that even people with $100,000 a year salaries are shopping as if they're broke. That's why we really need to discuss what exactly is happening, what it means for you, what implications it could have for our entire economy, and most importantly, how you can prepare and save before it's too late. Because very soon something will break. Well, before we start talking about the rising prices of everything, I'm proud to report that there's still one thing that doesn't cost you anything. This is to click the " like" button and subscribe if you haven't already. And as a token of gratitude for that, here's a photo of a lemon. Okay, before we get into the grisly details, it shouldn't be surprising that prices have increased significantly over the past year. And as for
how much- I hope you're sitting down, because this is really just crazy. Let's start with item number one, a very popular one-new and used cars. Believe it or not, the average cost of a new car has increased by 4% this year, with a record monthly payment of $765. Used car prices have increased by 8.2% since 2024, and even if you want to insure your car, it will cost 7.5% more. Next, we have number two-housing. As you might expect, it's not getting any cheaper either. Nationally, compared to last year. And since mortgage rates have exceeded 7%, your monthly payments are expected to be about 10% higher today than if you had bought the same
home a year ago. Also, even if you already own your own home, guess what? Electricity and natural gas are up 4%, and homeowners insurance. Third, we also need to eat, which means we have to consider the cost of groceries. It is not surprising that food prices have risen by 2.2% over the past year, eating out has risen by 3.4%, and prices for everyday goods such as beef, bread, coffee, and rice are rising much faster. Then, fourthly, what is life without at least a little travel? And if you want to go on vacation, that also costs significantly more. In fact, the cost of airline tickets increased by 23.4% compared to last year due to higher oil prices. Hotels and entertainment prices rose by about 3%, and car rentals
by 3.5%. And fifth, if you're thinking, "Oh, well, 3% is n't that bad, because salaries are also rising." So technically you are right to some extent, because there is also good news. Overall, workers' salaries have increased by 4.1% over the past year, but when the biggest expenses, such as housing, transportation, and health insurance, increase by the same amount, this salary increase does not have the same effect as most people believe. This is largely related to the sixth point: we are seeing higher interest rates. This means that mortgages, car loans, personal loans, and credit cards are significantly more expensive today than they were a year ago. And the less money people have left, the more they
need to borrow, precisely when those loans cost them even more. Which leads to the seventh point- massive money printing. This is not intended to be a statistical analysis, I'm just trying to simplify a complex topic, but overall the money supply is growing significantly. So, now that you understand the situation, we need to discuss what exactly is happening and what you can do about it, which unfortunately brings us to the danger zone. When it comes to how much money Americans save, the reality is pretty grim. The savings rate has been declining over the past decades and is now only 3%. While this is not necessarily a new phenomenon, it is concerning how quickly people are depleting their balances. And that's what brings me to this warning:
Americans You see, consumer spending is actually the backbone of the U.S. economy. And that's what's kept everything afloat for the last few years. For example, when someone spends money, it supports the business, which pays for production costs, employees, and raw materials. But company executives say it could be reaching a critical point. In fact, Kraft recently stated that we are seeing negative cash flows in the lower segments of the population, where people are forced to spend their savings. Of course, some might say, "But, Graham, the stock market is doing so well. It's almost at its all-time high." And that's true, but it only applies to the richest 1% of the population. As one economist noted, record stock market performance is not
encouraging consumers, which means most Americans are holding money in retirement accounts like 401k that can't be used to make their lives easier now. So, as for what comes next, how serious things can get, and what you can do about it -that's what you're here for. Because this is the part that almost everyone skips. Although, before we get to that, when it comes investing, saving, and accumulating capital, I think it's best to focus on what you can control. For example, we can't dictate interest rates, predict inflation, or decide what the stock market will do tomorrow, but we can choose where to spend our money. Gas, groceries, restaurants, for example-these are everyday expenses that most of us don't even think about. But here's what many people
overlook: you could be missing out on extra cashback on money you're going to spend anyway. And this is where our sponsor, Upside, comes to the rescue. For those who don't know, Upside is a completely free app that allows you to get extra cashback on purchases you would have made anyway. And once you get used to checking it, it becomes incredibly easy. Literally, every time you gas up, buy groceries, or go to a restaurant, just open the Upside app, see what offers are nearby, activate one, pay with your card as usual-and get cashback. That's all. Plus, it's not some weird rewards currency where you have to earn 75,000 points to buy a toaster. It's just real money that you can use and withdraw whenever you want. In fact, there are over
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use the QR code on the screen or the link below with the code Gram25. Use it. Thank you very much. Now let's get back to the video. So, to understand why Americans' finances are getting so bad, how quickly people are running out of money, and most importantly, what this means for you, we need to talk about the K-shaped economy. See what's the matter. While the bottom 50% barely make ends meet, the top 10% now provide over half of all spending, and this significantly skews most of the data we receive. For example, if you look only at the averages, everything looks quite good. For example, retail sales rose 1.2% in August, the best performance in 5 months, and employers added 162,000 jobs, more than double economists' expectations. But underneath
all this, if you remove the top 10%, the overall picture looks very different. For example, Americans currently owe $1.26 trillion on their credit cards. About 60% of cardholders do not pay off their balance in full, and a record 6% of 401k plan members made withdrawals last year due to hardship, the main reason for which was avoiding home loss or eviction. Essentially, the American economy is now completely divided. On one hand, you have people with stocks, homes, retirement accounts, and high incomes who have benefited enormously from rising asset prices. Well, on the other hand, there are people who now spend a larger share of their income on housing, transportation, healthcare, food, and they are feeling the pressure first and foremost, especially due to rising
oil prices. This is why most people don't suddenly run out of money. First, they run out of reserve funds. Then comes the turn of savings. Then come credit cards. Then it's time for retirement accounts. And this gradually moves up the income ladder. In fact, just last week, the CEO of Dollar General said that even households earning $100,000 or more are feeling the pressure and starting to shop like lower- income consumers. Typically, when people find themselves in a difficult situation, the Fed lowers interest rates to make borrowing cheaper. But this time they did the exact opposite, raising rates for the first time since 2023. They also made it clear that another increase is possible soon all because inflation is still above 3.4%. This
means that people who are running out of money now have to pay more on loans just to make it to the end of the month. And this can only last up to a certain point, until something breaks. So, when talking about solving this problem, we have to discuss savings. First of all, this won't be another lecture about not buying coffee at Starbucks, because if you're already saving on everything and your income is limited, then a $7 coffee is the least of your problems. That's why it's so important to focus on things that can really save you hundreds or even thousands of dollars a year. And it all starts with point number one- your savings account.
Believe it or not, the national average for savings accounts is just 0.63%, while the best high-yield accounts offer around 4.2%. This means that out of $10,000, the difference is between $63 and $420 per year, for doing practically nothing. So, if you have free money, this is where you should start. Next, number two - credit cards. The average interest rate on credit cards is currently hovering around 20%, and as these rates rise in line with the Fed, debt servicing is becoming more expensive. This means that if you have $5,000 in credit card debt, it costs you $1,000 a year in interest alone, which just disappears. To make things easier, call your bank and see if you can lower your interest rate. It is worth asking or considering
transferring the balance to another card, because even paying 3-5% of the debt amount immediately is much better than paying 20% over the course of a year. Next, we have number three- fuel prices. In that regard, the national average price is now $4.44 per gallon compared to about $3.20 a year ago. So, if you fill up a 15- gallon tank twice a week, you're spending an extra $1,000 a year on it. Unfortunately, it's impossible to influence the decline in fuel prices, but you can look for credit cards that give you a few percent back on every gas station and try to combine trips when possible. And finally, number four -don't touch your 401k retirement account.
Unfortunately, it seems that the number of hardship withdrawals is on the rise, but this should be your last resort because after that, you lose that money from your retirement account forever. They are taxed as ordinary income, and depending on the circumstances, you may owe an additional 10% early withdrawal penalty. This means that at a 22% tax rate, withdrawing $10,000 from a 401k account costs only $6,800 before federal taxes, state taxes, and the early withdrawal penalty, if applicable. And that's without even considering all the money you'll lose in the future due to compound interest. So, at all costs, don't do this if at all possible. And finally, fifth: think twice before
taking out a loan. Interest rates are currently at their highest in decades, and without exaggeration, borrowing now is probably the worst decision you can make if you don't have to. Of course, as for whether something will break in the future and what you can do about it, here's my personal opinion. From my perspective, I don't think the economy is falling apart yet. The labor market is still strong. Unemployment is only 4.1%, and people continue to spend money. But I believe that the economy is splitting into two parts. And if something breaks, the bottom 50% will feel it first, and then it will slowly start to spread upwards. Here's the thing:
the Fed is now effectively at an impasse. If they continue to raise interest rates to combat inflation, they will hurt those who can least afford it. But if they lower interest rates, they risk further accelerating inflation, which also hurts the bottom 50% of the population. That's why I believe there are three steps you can take today to significantly improve your situation in the future. It's worth starting with the first: create a greater margin of safety for yourself. Personally, I would try to save closer to 15-20% if at all possible, or save up a few months of expenses so that if something happens, you can last long enough to get back on your feet. Which brings me to the second point.
Get rid of expensive debt. If you have credit card debt at 20-25% APR, there is nothing you can wisely invest in to get that kind of return. So every month when you don't pay off your credit card, you're spending a bunch of money financing your lifestyle that's not worth it at all. Direct all additional income, if possible, towards these credit card debts as soon as possible. And finally, third: don't let lifestyle inflation "eat up" your salary increases. Sure, if you get a 4% raise this year, you technically earn more, but if rent, healthcare, transportation, and groceries all go up by the same 4%, you might be left with nothing. This means that instead of automatically assuming that every raise will allow you
to save more, create that difference yourself. This could mean refinancing or getting rid of expensive debt, finding better insurance, canceling subscriptions, or, if there's nothing left to cut, simply finding ways to increase your income. After all, in the end, you can only save what is left after you control your income. That's why no one knows how long consumers will continue to spend, whether inflation will slow, whether oil prices will fall, or whether the economy will eventually slow down. But the winners are those who do everything they can to save as much as possible, maintain a stable income, pay off expensive loans, and set aside enough cash to have the means to survive and, preferably, make profitable investments. For me, this financial
safety net may become more valuable than ever in the future, especially if you click "like" and subscribe if you haven't already So, with that in mind, thank you very much for watching. By the way, if you're curious about what exactly I invest in and how my portfolio is doing, feel free to add me on Blossom Social using the link in the description below. It's completely free. It is essentially a platform where you can upload your portfolio for others to see and discuss. By the way, you can see how I work compared to Caleb Hammer. And believe it or not, this service was created by one of the subscribers. He contacted me, told me about his company, and I really like it.
I want to support people who support this channel in the same way. So, without further ado, if you want to see what I'm investing in, add me at this link in the description below. Enjoy. Thank you very much. And until next time.
