If you’re like most people, your income and spending changes significantly as you get older.
In the most common career trajectory, earlier years coincide with a lower salary as skills and experience grow. Then, peak earning years are achieved in late adulthood, and eventually retirement comes onto the horizon.
Is this typical earnings arc supported by data?
Income and Spending, by Age
The data visualizations in today’s post come to us from Engaging Data and they use Sankey diagrams to display data from the Bureau of Labor Statistics (BLS) showing differences in how various age groups in America earn and spend their money.
The four charts below will show household data based on the age of the primary resident:
- Less than 25 years old (Very early career)
- Between 25-34 years old (Early career)
- Between 45-54 years old (Peak earning and spending)
- More than 75 years old (Retirement)
Let’s take a look at the collection of data, to see how it shakes out.
Less than 25 Years Old – $31,102 in spending (94.6%% of total income)
These contain an average of 1.9 people (1.3 income earners, 0.3 children, and 0.0 seniors)
For the average household with a primary resident under 25 years old, total income is $32,893.
The biggest expense is housing (24.3% of spending), followed by vehicles (10.8%), gas and insurance (9.3%), food at home (7.7%), and dining out (7.6%). For this younger cohort, education is also a significant expense at $2,333 per year (7.5% of spending).
Between 25-34 Years – $48,928 in spending (70.8% of total income)
These contain an average of 2.8 people (1.5 income earners, 1.0 children, and 0.0 seniors)
In this age range, earning potential starts to rapidly expand with experience – and households make double that of the previous category (Under 25 years old).
Housing remains the biggest expense (25.9% of spending), followed by gas and insurance (9.2%), household expenses (8.2%), food at home (8.1%), and then vehicles (8.1%).
Between 45-54 Years – $64,781 in spending (64.6% of total income)
These contain an average of 2.8 people (1.7 income earners, 0.7 children, and 0.1 seniors)
This age range is notable because it has both the highest income and the highest spending. It also represents a time of peak savings, with the average household stashing away $19,159 per year.
Expenses are similar to the previous category. Housing is the biggest expense (22.0%), followed by gas and insurance (9.0%), food at home (7.9%), vehicles (7.9%), and household expenses (6.7%).
Over 75 Years Old – $40,211 in spending (95.6% of total income)
These contain an average of 2.6 people (0.2 income earners, 0.0 children, and 1.4 seniors)
Not surprisingly, here we see salary contributing just $7,891 per year to total income, with social security supplementing income with $25,057 per year.
For this older segment, health insurance (8.2%) jumps up to become the second most important expense. Meanwhile, driving and housing both drop in their respective allocations.
The Typical Earning Arc?
The data confirms that conventional wisdom around the typical earning trajectory for Americans seems pretty accurate.
Did you find any surprising anomalies in the numbers?
Sustainable Investing: Debunking 5 Common Myths
Do sustainable strategies underperform conventional ones? This infographic shines a light on the realities of sustainable investing and the ESG framework.
Sustainable Investing: Debunking 5 Common Myths
It began as a niche desire. Originally, sustainable investing was confined to a subset of investors who wanted their investments to match their values. In recent years, the strategy has grown dramatically: sustainable assets totaled $12 trillion in 2018.
This represents a 38% increase over 2016, with many investors now considering environmental, social, and governance (ESG) factors alongside traditional financial analysis.
Despite the strategy’s growth, lingering misconceptions remain. In today’s infographic from New York Life Investments, we address the five key myths of sustainable investing and shine a light on the realities.
|Sustainable strategies underperform conventional strategies||Sustainable strategies historically match or outperform conventional strategies|
In 2015, academics analyzed more than 2,000 studies—and found that in roughly 90% of the studies, companies with strong ESG profiles had equal or better financial performance than their non-ESG counterparts.
A recent ranking of the 100 most sustainable corporations found similar results. Between February 2005 and August 2018, the Global 100 Index made a net investment return of 127.35%, compared to 118.27% for the MSCI All Country World Index (ACWI).
The Global 100 companies show that doing what is good for the world can also be good for financial performance.
—Toby Heaps, CEO of Corporate Knights
|Sustainable investing only involves screening out “sin” stocks||Positive approaches that integrate sustainability factors are gaining traction|
In modern investing, exclusionary or “screens-based” approaches do play a large role—and tend to avoid stocks or bonds of companies in the following “sin” categories:
However, investment managers are increasingly taking an inclusive approach to sustainability, integrating ESG factors throughout the investment process. ESG integration strategies now total $17.5 trillion in global assets, a 69% increase over the past two years.
|Sustainable investing is a passing fad||Sustainable investing has been around for decades and continues to grow
Over the past decade, sustainable strategies have shown both strong AUM growth and positive asset flows. ESG funds attracted record net flows of nearly $5.5 billion in 2018 despite unfavorable market conditions, and continue to demonstrate strong growth in 2019.
Not only that, the number of sustainable offerings has increased as well. In 2018, Morningstar recognized 351 sustainable funds—a 50% increase over the prior year.
|Interest in sustainable investing is mostly confined to millennials and women||There is widespread interest in sustainable strategies, with institutional investors leading the way|
Millennials are more likely to factor in sustainability concerns than previous generations. However, institutional investors have adopted sustainable investments more than any other group—accounting for nearly 75% of the managed assets that follow an ESG approach.
In addition, over half of surveyed consumers are “values-driven”, having taken one or more of the following actions with sustainability in mind:
- Boycotted a brand
- Sold shares of a company
- Changed the types of products they used
Women and men are almost equally likely to be motivated by sustainable values, and half of “values-driven” consumers are open to ESG investing.
5. Asset Classes
|Sustainable investing only works for equities||Sustainable strategies are offered across asset classes|
This myth has a basis in history, but other asset classes are increasingly incorporating ESG analysis. For instance, 36% of today’s sustainable investments are in fixed income.
While the number of sustainable equity investments remained unchanged from 2017-2018, fixed-income and alternative assets showed remarkable growth over the same period.
Tapping into the Potential of Sustainable Investing
It’s clear that sustainable investing is not just a buzzword. Instead, this strategy is integral to many portfolios.
By staying informed, advisors and individual investors can take advantage of this growing strategy—and improve both their impact and return potential.
Venture Capital Mega-Deals on Pace to Set New Record in 2019
With bigger deals and multi-billion dollar IPOs, venture capital financing is reaching new heights. This infographic explores the latest trends.
The Rise of Mega-Deals in Venture Capital Financing
Venture capital “mega-deals”—which rake in $100 million or more—have taken off at breakneck speed. A total of 185 were signed by the end of September, setting the pace for a record number of mega-deals in 2019.
Interestingly, mega-deal counts aren’t the only thing ballooning in venture capital financing. Almost everything has gotten bigger: venture capital funds, deal sizes, and exit valuations.
Today’s infographic comes from Pitchbook’s quarterly Venture Monitor, and visualizes the trends shaping the U.S. venture capital landscape.
Venture capital fundraising remains robust, with $29.6 billion raised across 162 funds year-to-date. Not only that, a higher proportion of funds are quite large. Roughly 9% were sized $500 million or more, with 15 such mega-funds closed year-to-date.
What does it mean to “close” a fund? Before they can begin operations, a venture capital fund manager will raise money from investors. The fund closes to signify the end of a fundraising round and can go through multiple closings until it reaches its targeted fundraising amount.
In the coming years, fundraising will likely remain strong. Venture capital net cash flows have been positive since 2012, which means capital is being returned to the limited partners of a fund faster than they can reinvest it into new vehicles.
With this excess cash, investors will likely contribute to the next round of venture capital funds—continuing the virtuous cycle.
Total deal value is set to surpass $100 billion for a second consecutive year, partly driven by the rise of mega-deals. At every stage of startup financing, average deal sizes remain elevated.
While the focus has shifted to the massive amount of capital available at later stages, angel and seed-stage deals are still quite healthy, with an average deal size of over $2 million.
At late financing stages, the 2019 average deal size is nearly $35 million, second only to 2018’s record of $44 million. Companies continue to raise large sums of capital prior to going public, with 140 late-stage mega-deals completed in 2019.
Total exit value reached $200 billion for the first time in a decade. Interestingly, initial public offerings (IPOs) comprised a whopping 82% of overall exit value.
Multi-billion dollar IPOs continue to dominate headlines, with six such public debuts occurring in the third quarter.
|Company||Industry||Pre-Money Valuation at IPO||Amount Raised at IPO|
|Datadog||Network Management Software||$7.2B||$648M|
|Peloton Interactive||Recreational Goods||$6.9B||$1.2B|
|Cloudflare||Network Management Software||$3.9B||$525M|
Notably missing from the list is WeWork. The company failed to go public due to profitability concerns, and anchor investor Softbank recently provided $9.5 billion in bailout financing in an attempt to rescue the company.
Sky High Valuations
As venture capital reaches new heights, analysts will be paying closer attention to each startup’s profitability potential.
“… new companies are shifting their focus to measured growth in an effort to prioritize long-term success and a more sustainable, scalable business model.”
–Alex Song, CEO and Co-Founder of Innovation Department
With 2019 coming to a close, will fourth quarter venture capital activity be able to maintain its present momentum?
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