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Figuring out how to budget for daily expenses, getting started investing so your money grows over time and making sure you’ll have the money to retire is tough.
Here’s a look at three common financial concerns many people tend to have.

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Your net worth is essentially the sum of all of your assets — cash, retirement accounts, college savings, house, cars, investment properties and valuables such as art and jewelry — minus any liabilities, or long-term debt, like a mortgage, student loans, credit card balances, car loans and any other personal loans.
If your net worth is negative, which is not uncommon, you’ll need to work on saving more and spending less.
2. Try following the “60% Solution.” To figure out how much money to spend and save, create a monthly budget for your necessary and discretionary expenses, as well as long-term and short-term savings.
The 60% Solution is one budgeting strategy that I’ve found works well.

The first 60% of your gross income (all of the money you have coming in for the month) goes to “committed expenses,” which includes all taxes, housing costs (rent or mortgage, plus utilities), credit card and everything else that you must pay each month.
The next 30% goes to savings — 20% to long-term savings, including 401(k) plans, individual retirement accounts and other similar products, and 529 college savings plans, and the 10% to short-term savings like your emergency fund.
The remaining 10% is “fun money” for you to spend on whatever you want.

3. Use a spreadsheet, software or mobile app to track your earnings and expenses: Now that you have an idea of where your money should be going, you need to know where it is going right now. Keep track of your earnings and expenses on a spreadsheet or app.
You can use a spreadsheet like Google Sheets, try budgeting software or download an app like Mint or Goodbudget. There are lots of free budgeting tools available online and for your smartphone. Find a tool that shows your income, expenses and savings goals — and helps you manage your money to improve your overall net worth.
‘I have decent savings, and I know I could be making money off it. But I’m scared of the stock market. Any advice for a beginner?’
Before you start investing, outline your priorities and your financial goals. Focus on funding emergency savings, paying off any high interest debt and contributing to retirement savings accounts.
Make sure you have at least three to six months’ worth of living expenses in an emergency fund. Top rates for high-yield savings accounts are nearly 5% right now.
Ken Tumin, founder and editor of DepositAccounts.com, recommends opening an online savings account that links to a checking account at the same bank, and then you can move cash back and forth. “That makes it real easy,” he said. “That money you don’t need right away, you can put into the savings account and get some decent yield — more than we’ve been able to get for more than 10 years.”

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If you have high interest debt, like credit card debt, work on paying it off. That represents a significant return: The average rate on a credit card is more than 20%. Meanwhile, even though the overall stock market has been in recovery mode, the S&P 500, which tracks the stocks of 500 of the largest U.S. companies, is only up a little over 7% year to date.
You do want to invest your savings in stocks for the most growth over a long period of time, say the next decade or more. Start by contributing as much as you can to your retirement savings accounts at work, like a 401(k) or 403(b) plan, or on your own in a Roth IRA if your job doesn’t offer a plan. If you’re self-employed, you can contribute even more money to a Solo 401(k).
Consider investing in an S&P 500 Index fund as your initial stock investment. Investing your money in the stock market depends on your financial goals, your risk tolerance and when you’ll need the money.
Start with that S&P 500 fund as your core holding in your retirement account, suggests Winnie Sun, co-founder and managing director of Irvine, California-based Sun Group Wealth Partners and a member of the CNBC Financial Advisor Council. “You can add other stock mutual funds and exchange-traded funds as your portfolio grows,” she said. 

If you don’t want to take on much risk, stable value funds that invest in a mix of bonds may also be worth considering as interest rates are pretty high right now, she added.
Once you have an ample emergency fund and no or little high interest debt, and have contributed the maximum amount to your workplace retirement plan — or at least enough to get your employer’s matching contribution, if offered — then you can open a brokerage account to invest on your own.
Make sure you list your financial goals so you know why you are investing and when you’ll need the money: for college, a home purchase or leaving money for your loved ones. Working with a financial advisor can also help you stay on track.
‘I’m in my mid-50’s and I don’t feel like I have enough money saved up for retirement. How do I calculate how much money I will need, and how long of a retirement should I plan for?’
With inflation, many Americans worry they may not have enough money for retirement, but your life expectancy may be an even greater factor. You could live well into your 80s or longer, depending on retirement income for 15 to 20 years or more.
These two planning tips may help:
Do a “retirement checkup”: Think about at what age you want to retire or stop working full time and consider the Social Security or other benefits you would get at that time. If you’re in your mid-50s, you’ll receive your full retirement benefits from Social Security at age 67. If you retire early at 62, your benefits will be reduced by 30%. But if you delay retirement to age 70, you’ll get 124% of your full retirement benefits.

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Also, consider how you’ll want to live in retirement. Will you have the same lifestyle? Downsize to a smaller home? Will you move to an area where the cost of living is lower than where you are now? Where you live and how you live can have a significant impact on your expenses.
Create a “retirement budget”: Make a trial budget for your retirement. Factor in your day-to-day expenses, like housing costs, food, health care and long-term care in the city where you plan to live.

It’s a good idea to start talking about your loved ones on what your plan is if you need care and factor this into your retirement savings.

Winnie Sun
managing director of Sun Group Wealth Partners

“Roughly 70% of people age 65 and older will need some type of long-term care during their lifetime,” Sun said. “It’s a good idea to start talking about your loved ones on what your plan is if you need care and factor this into your retirement savings.”
Moving to a lower-cost area may help lower overall expenses. If you downsize, some of the costly expenses you have now, like your mortgage, may no longer exist or will be significantly reduced, decreasing your overall expenses in retirement.
Next, add up all the income you might receive in your post-working years. Factor in pension income if you have one, Social Security payments and any other dollars, such as rental income from a property, that may come your way. Match up revenue and expenses and you’ll get a good idea of what you’ll need to set aside for every year of your retirement.
If you don’t think you’ll have enough money for retirement based on your current savings, plan on working part time in the early part of your retirement — and boost your retirement plan contributions now.
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FA Playbook

Consumers are finally changing their spending habits amid fears of an upcoming recession.
Now, 71% of Americans are likely to keep cash on hand, according to a new report. 
Depending on how accessible you need this money to be, here are some of the best ways to earn interest on your savings.

Renewed fears of a possible recession have spurred more households to adjust their spending habits — finally.
Broadly, Americans are cutting back, particularly on discretionary purchases, and saving more, according to recent reports on the state of the consumer by the Bank of America Institute and Deloitte.

Now, 71% of Americans are likely to keep cash on hand, according to a new Country Financial security index.
To save more, about half of all adults are dining out less frequently and 42% have changed the way they shop for food, according to the Country Financial report, which was provided exclusively to CNBC before its general release Wednesday. Other consumers are driving less to save on gas or canceling some streaming services.
More from Personal Finance:Credit card debt nears $1 trillion3 financial risk areas for consumers to watchHere’s how much emergency savings you need
“With elevated inflation, Americans are doing what they can to make ends meet,” said Chelsie Moore, a certified financial planner and director of wealth management solutions at Bloomington, Illinois-based Country Financial.
“A market of high interest rates is favoring savers versus spenders,” she said. “This means those who are saving are getting paid more to do it.”

Even as Americans are more likely to keep cash on hand, most said they don’t know the best ways to save to reach their short- or long-term savings goals, according to Country Financial.

The best places to park your savings More

Washington lawmakers are still at a stalemate over debt ceiling negotiations.
Any deal that emerges will likely just get the country past the emergency deadline, experts say.
As more spending reform is needed, here’s why policy makers may turn to Social Security and Medicare.

A billboard showing the debt limit is seen in Washington, D.C. on April 17, 2023.
Mandel Ngan | AFP | Getty Images

As lawmakers work to hammer out a debt limit deal, experts already say more needs to be done to curb the nation’s spending, and that could include Social Security and Medicare reform.
The debt ceiling is the maximum amount of money that the federal government may borrow to pay its bills. If the government crosses that threshold, it may default on its debt.

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The point at which the government may not be able to pay all of its obligations — known as the “X date” — could happen in the first two weeks of June, according to the Congressional Budget Office. Treasury Secretary Janet Yellen has warned the U.S. could run out of money as soon as June 1.
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Thus far, lawmakers have been unable to quickly resolve the issue. House Republicans have passed legislation called the Limit, Save, Grow Act to raise the debt ceiling. But Democrats including President Joe Biden have rejected the terms.
While there is optimism both parties will come together to address the issue, experts say it is unlikely any compromise will include long-term fixes for the nation’s fiscal woes.
Debt held by the public as a share of GDP averaged about 46% to 47% from 1973 to 2022, Jason Fichtner, chief economist at the Bipartisan Policy Center, noted during a webcast hosted by the think tank on Monday.

That debt is now near 100%, he said, while the CBO is projecting it could climb to 118% of GDP by 2033, the highest level recorded.

Debt likely to require more negotiations

The fiscal imbalance is leading to significant debts and deficits, noted Warren Payne, senior advisor at law firm Mayer Brown. And while the debt limit will be an “action-forcing event,” the results likely will not go far enough, he said.
“We’re not going to have any big substantial change in the debt and deficit trajectory based on what is coming out of the negotiations right now,” Payne said.
“It’s going to be really important that this conversation continues into another round of negotiations,” he added.

One way to save may be to address spending on programs like Medicare and Social Security, the experts said. Both programs could be in the crosshairs if the government hits the debt ceiling and is forced to choose among its obligations.
Long-term, both programs have complex reform needs. Medicare’s Hospital Insurance trust fund will be depleted in 2031, according to the latest projections from the program’s trustees.
Meanwhile, Social Security’s trust fund used to pay retirement benefits will be able to send full checks for just 10 years, the Social Security trustees project. At that point, 77% of those benefits will be payable. When combined with Social Security’s disability trust fund, the projected depletion date is 2034.
Rather than wait for a big overhaul, more incremental changes can be made these programs now, experts suggested during Monday’s Bipartisan Policy Center panel.

Curb excess Medicare spending

While debt ceiling negotiations have focused on work requirements for government programs, there may be other ways to help reduce spending, noted Jim Capretta, senior fellow at the American Enterprise Institute.
In Medicare and Medicaid, “there’s a lot of waste, fraud and abuse, and it has been that way for a long time,” Capretta said.

The government may be able to do better with more resources by implementing additional background checks and requirements to make sure providers are legitimate before they get paid, he said.
In addition, Medicare is paying different prices for the same services based on where they are provided provided, and may save a “pretty good amount of money” by revisiting that policy, Capretta said.
Admittedly, these changes may not solve all of Medicare’s fiscal woes, he said, but may provide a more immediate way to start to cut costs.

Automatic adjustments to Social Security

Social Security benefits are largely based on payroll taxes that fund retirement or disability benefits.
The program has some adjustments in place for inflation or wage growth.
However, it does not correct for a mismatch when demographics change, Capretta noted.
By building automatic adjustments into Social Security — such as for length of retirement, mortality estimates, fertility estimates and wage growth — the program could self-correct on a gradual basis, which would enable it to stay solvent, Capretta said.

We’re not going to have any big substantial change in the debt and deficit trajectory based on what is coming out of the negotiations right now.

Warren Payne
senior advisor at Mayer Brown

This would avoid requiring Congress to enact changes to keep the program in balance, he said.
Notably, one change enacted in 1983 — raising Social Security’s retirement age to 67 — is still getting phased in for today’s retirees.
Those reforms went right up to the deadline before Congress was able to act because Social Security is so “politically fraught,” noted Payne.
Future negotiations may have the same urgency, he said, as lawmakers generally avoid topics like raising the retirement age or hiking payroll taxes.
“What we’ve seen recently is Congress is largely incapable of even having that conversation,” Payne said. More

Total credit card debt stood at $986 billion in the first quarter of 2023, according to the Federal Reserve Bank of New York.
Usually, balances fall in the beginning of the year as borrowers start paying down debt after the peak holiday shopping season — not this time.
Credit card balances are up almost 20% from a year ago, according to a quarterly credit industry insights report from TransUnion.

Collectively, Americans owe nearly $1 trillion on credit cards.
Total credit card debt stood at $986 billion at the start of 2023, unchanged from the record hit at the end of 2022, according to a new report on household debt from the Federal Reserve Bank of New York.

Typically, balances fall in the beginning of the year as borrowers start paying down debt after the peak holiday shopping season. “This is the first time in 20 years we are not seeing a decrease,” according to New York Fed researchers, citing inflation and a higher cost of living.
More from Personal Finance:3 financial risk areas for consumers to watchAmericans are saving far less than normalA recession may be coming — here’s how long it could last
Credit card balances are up almost 20% from a year ago, according to a separate quarterly credit industry insights report from TransUnion.
The average balance rose to $5,733 over that same period, TransUnion found.
“As inflation rose to near 40-year-high levels, many consumers have used credit to help manage their budgets, leading to record- or near-record high balances,” said Michele Raneri, TransUnion’s vice president of U.S. research and consulting.

“Unfortunately, credit card debt is likely only to keep rising in the near future,” said Matt Schulz, chief credit analyst at LendingTree.

On the heels of another rate hike earlier this month by the Federal Reserve, the average credit card rate is now more than 20% on average, an all-time high.
Sky-high APRs make credit cards one of the most expensive ways to borrow money from month to month and yet, many Americans continue to take on ever-increasing amounts of debt. While balances are higher, nearly half of credit card holders carry credit card debt from month to month, according to a separate Bankrate report.
However, there are some strategies to help pay down high-interest credit cards once and for all. Here’s what experts recommend:

Five ways to tackle high-interest credit card debt

1. Reassess your spending. Most experts recommend starting with a basic budget. “The truth is that you cannot make a meaningful plan to tackle debt if you don’t know exactly how much money is coming in and going out of your household each month,” Schulz said.
“You may not like what you see, but it is better to deal with the reality of the situation than to bury your head in the sand.”

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Using a worksheet or online tool can help you assess where you are spending money and how to better disperse those funds.
2. Plan a payoff strategy. There are two ways you could approach repayment: prioritize the highest-interest debt or pay off your debt from smallest to largest amount, according to Russell Nelson, manager of the credit card products acquisition team at Navy Federal Credit Union.
The avalanche method lists your debts from highest to lowest by interest rate. That way, you pay off the debts that rack up the most in interest first. The snowball method prioritizes your smallest debts first, regardless of interest rate, to help gain momentum as the debts are paid off.
With either strategy, you’ll make the minimum payments each month on all your debts and put any extra cash toward accelerating repayment on one debt of your choice. “You may also consider setting up automatic payments along with text alerts on your mobile device to ensure payments are made on time,” Nelson advised.
3. Snag a 0% balance transfer credit card. Cards offering up to 21 months with no interest on transferred balances are one of the best weapons Americans have in the battle against credit card debt, Schulz said.

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To make the most of a balance transfer, aggressively pay down the balance during the introductory period. Otherwise, the remaining balance will have a new annual percentage rate applied to it, which is about 23%, on average, in line with the rates for new credit, according to Schulz.
4. Ask for a lower credit card rate. If you’re carrying a balance, try calling your card issuer to ask for a lower annual percentage rate. “You really have nothing to lose,” Schulz said.
In fact, 76% of people who asked for a lower interest rate on their credit card in the past year got one, according to a LendingTree report. You may also be able to get a reduced annual fee, higher credit limit or waived late fee, Schulz added.
5. Take advantage of high-yield savings accounts. In addition to paying down your debt, put aside some money to build up your emergency reserves, which will keep you from accumulating more debt while you’re working to pay off your existing balance.

“Robust savings are key to getting out of debt,” Schulz said.
Take advantage of competitive rates at an online bank, added Greg McBride, chief financial analyst at Bankrate.com. After years of rock-bottom returns, some top-yielding online savings accounts and one-year certificates of deposit rates are now as high as 5%.
“This could be ‘last call’ for savers,” McBride said, adding, “CD yields on maturities of one year and longer have peaked and now is the time to lock in.”
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Ask an Advisor

Investment loss may take longer to recover than expected.
Simple arithmetic shows that investors who experience a loss always need a higher corresponding return to get back to baseline.
This principle has important implications for certain investors like retirees.

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Have a losing investment? You may need to wait longer than you think to regain that loss.
The answer lies in simple arithmetic.

Yet, “investors always misunderstand this,” said Ted Jenkin, a certified financial planner based in Atlanta and a member of CNBC’s Financial Advisor Council.
Here’s an example: Let’s say you invest $10 in a stock. Its value declines to $8 — a 20% loss. The stock’s value then rebounds by 20%.
You might guess you’ve broken even — but you haven’t. That 20% gain returns the stock’s value to $9.60, not the original $10.
It would take a 25% increase to fully regain the initial $2 loss.

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Here are more FA Council perspectives on how to navigate this economy while building wealth.

This math is “why recovering what you lost is so hard, because you always have to achieve a better return than the actual return you lost,” said Jenkin, founder and CEO of oXYGen Financial.

Here’s a recent real-world example.
The S&P 500 stock index plummeted in the early days of the Covid-19 pandemic. The index declined from its 3,386.15 closing value on Feb. 19, 2020, to 2,237.40 on March 23, 2020 — a 34% loss.
The index had recouped its value by Aug. 18 that year, when it closed at 3,389.78 — a 52% gain from the low point in March.

This is perhaps a sobering math lesson for investors, who tend to feel the pain of a financial loss more strongly than a gain.
But it carries important implications for certain investors, too.
For example, retirees may opt to withdraw a certain share — say, 3% or 4% — of their retirement accounts every month for income. If those accounts decline in value — meaning income would decline, too — it may take “much longer than you think to get back to your regular income level,” Jenkin said. More

The U.S. Department of Education has in recent years canceled more than $66 billion in education debt.
More than 2 million borrowers have benefited from that relief.
Here’s what to know.

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Although the Biden administration’s sweeping student loan forgiveness plan and the legal troubles around it have gotten the most headlines, the U.S. Department of Education has already canceled more than $66 billion in education debt under existing programs.
More than 2 million borrowers, including defrauded students and those who work in the public sector, have benefited from that relief over the last few years.

“I feel like this administration has done more for borrowers in a short period of time than any other, especially for the most vulnerable borrowers such as the disabled and victims of fraud,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.
Still, advocates are worried about the administration’s plan to soon resume federal student loan payments, which have been suspended since March 2020, without deeper debt cancellation. Even before the Covid-19 pandemic, 1 in 4 student loan borrowers were in delinquency or default.
Here’s a breakdown of the debt relief already granted — and how to know if you qualify for it.

$42 billion in debt canceled for public servants

The Public Service Loan Forgiveness program allows certain nonprofit and government employees to have their federal student loans canceled after 10 years, or 120 payments.
A number of recent changes to the policy have increased the number of borrowers who’ve had their debt canceled under it. Those changes include simplifying and broadening the eligibility requirements.

As a result, the Education Department announced this month that it has approved $42 billion in loan cancellation under the PSLF program for more than 615,000 borrowers since October 2021.

The best way to find out if your job qualifies as public service is to fill out the so-called employer certification form. Try to fill out this form at least once a year, said higher education expert Mark Kantrowitz. Borrowers should also maintain records of their confirmed qualifying payments, he said.
The pause on federal student loan payments, which has been in effect for over three years now, has proven to be a massive benefit for borrowers pursuing PSLF, Kantrowitz pointed out. All the months during the pause count toward a borrower’s 120 required payments.

Defrauded borrowers got $13 billion in relief

The Biden administration has been focused on canceling the student debt of borrowers who say their colleges misled them. Over the last few years around 1 million people have had their debt relieved through the so-called borrower defense loan discharge, for a total of $13.3 billion in relief.
Generally, a borrower may qualify for debt cancellation under the provision if their college engaged in misconduct, such as providing false or misleading information about their program or job placement rates, Kantrowitz said.

I feel like this administration has done more for borrowers in a short period of time than any other.

Betsy Mayotte
president of The Institute of Student Loan Advisors

The Project on Predatory Lending at Harvard University has a list of some of the institutions that were part of a student loan cancellation settlement. If you attended one of these colleges and applied for a borrower defense loan discharge on or before June 22, 2022, you should be entitled to automatic relief, Kantrowitz said, even if your application was previously denied. Eligible borrowers will likely get the cancellation no later than Jan. 28, 2024.
An additional 100,000 borrowers, meanwhile, have had their debt canceled because their college closed while they were enrolled or shortly after.

$9 billion for borrowers with disabilities

Around 425,000 federal student loan borrowers have had their debt forgiven under President Joe Biden through the Total and Permanent Disability Discharge, for a total of $9.1 billion in debt erased, according to a calculation of Education Department data by Kantrowitz.
The relief provision is for borrowers with a physical or mental disability that makes it difficult or impossible for them to work.

The U.S. Department of Education in Washington, D.C.
Caroline Brehman | CQ-Roll Call, Inc. | Getty Images

More borrowers with disabilities have seen the relief in recent years, after the Education Department started using data from the Social Security Administration and U.S. Department of Veterans Affairs to identify eligible people and to automatically grant them the cancellation, Kantrowitz said. This process of data matching is usually done once a quarter, he said, and borrowers who are eligible should be notified by the Education Department and their loan servicer.
The Education Department has also decided to do away with the three-year monitoring period of the program, in which borrowers had to continue to meet a number of requirements after they got the relief, including earning below a certain amount. That procedure caused more than half of all approved borrowers to get their loans reinstated, Mayotte said.
Even if a borrower is not considered disabled by another government agency, a doctor or nurse practitioner may also be able to make the case that they qualify for the discharge. Those who think they might be eligible can apply online or by mail.

$400 billion in forgiveness still in the balance

Of course, beyond these tailored relief programs, millions of Americans are waiting for the Supreme Court to rule on President Joe Biden’s sweeping plan to cancel up to $20,000 in student debt per borrower.
The plan could wipe out as much as $400 billion in debt.
If the Biden administration is able to carry out its plan, Kantrowitz said, “you can’t have your loans forgiven twice.”

If you’ve already received debt cancellation under one of the above programs and have no remaining debt, he said, the president’s plan won’t affect you.
If you still have student loans, you may qualify for the broad forgiveness of $10,000 or $20,000, he said.
Kantrowitz said borrowers with questions about their eligibility for loan forgiveness should contact their servicer or the Education Department at 1-800-433-3243.
Meanwhile, there are dozens of other forgiveness options currently available on the state and federal level for those with federal student loans. More

The U.S. hit its debt ceiling, or debt limit, in January.
The nation may run out of money to pay all its bills as soon as June 1, the so-called “X-date.”
The government wouldn’t be able to pay everyone on time. It would likely prioritize payments to investors holding U.S. Treasury bonds, to avoid a “technical default.”
Payments like Social Security, Medicare, tax refunds, military salaries and others would likely be delayed.
Democrats and Republicans haven’t yet reached an agreement to raise or suspend the debt ceiling and avoid that outcome.

U.S. Senate Minority Leader Mitch McConnell, R-Ky.; Speaker of the House Kevin McCarthy, R-Calif.; President Joe Biden; and Senate Majority Leader Chuck Schumer, D-N.Y., meet in the Oval Office on May 9, 2023 to discuss the debt ceiling.
Anna Moneymaker | Getty Images News | Getty Images

The U.S. may be weeks away from being unable to pay its bills — an event that, should it come to pass, would likely be accompanied by broad and painful financial consequences for American households.
Among the ramifications of a debt ceiling standoff, any payment issued by the federal government — like Social Security, Medicare, tax refunds, military paychecks and ample others — may be delayed.

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As an illustration, if the U.S. has just 80 or 90 cents for every dollar it owes, it will be forced to defer certain payments.
“Someone is getting shortchanged,” said Michael Pugliese, senior economist at Wells Fargo Economics.
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There are many unknowns: the length of any delay or if the government would prioritize certain payments, for example. The U.S. has never been in this situation and the government hasn’t issued a public road map outlining its response, meaning there’s a certain amount of guesswork involved.
“We’re looking at some sort of contagion effect,” said Rachel Snyderman, senior associate director of economic policy at the Bipartisan Policy Center, a think tank. “The degree of contagion is unknown.”

Why a standoff may delay federal payments

U.S. Treasury Secretary Janet Yellen on April 21, 2023 in Washington.
Alex Wong | Getty Images News | Getty Images

The U.S. is in this situation due to a political standoff tied to the debt ceiling, also known as the debt limit. This ceiling is the amount of money the U.S. is authorized to borrow to pay its bills.
The nation runs a budget deficit, meaning it spends more than it makes in revenue. It must therefore borrow money to meet its obligations.
Congress periodically raises or temporarily suspends the debt ceiling to avoid the other scenario: a default on the national debt and other federal payments.  
Here’s the current problem: The country hit the debt ceiling — currently $31.4 trillion — in January. Since then, the U.S. Department of the Treasury has been able to shift money around and delay the so-called “X-date,” the day on which the federal government can no longer pay its bills in full.

That date may be as soon as June 1, Treasury Secretary Janet Yellen said last week.
But a political impasse between Democrats and Republicans means a deal has, so far, been elusive.
If the U.S. reaches the X-date without a debt ceiling deal, it would be the first time in U.S. history that the federal government has intentionally reneged on its financial promises.
This is where the hypotheticals around “who gets paid and when” start to come into play. Some clues and educated guesswork can help to answer that question.

Bondholders prioritized to avoid ‘financial Armageddon’

It’s likely that the government would first pay investors and financial entities holding U.S. Treasury bonds. These payments to bondholders would be for principal and interest.
Federal Reserve officials alluded to the likelihood of prioritizing bondholders in a 2011 meeting that followed an earlier debt ceiling episode.
Not doing so would trigger a “technical default.” In other words, the U.S. would default on its debt payments.
While missing any federal payment would likely sow chaos, the scenario of missed bond payments “is what would really trigger financial Armageddon,” Wells Fargo’s Pugliese said.
U.S. Treasury bonds are the foundation of the whole global capital structure, he said.

The market for Treasury bonds — worth about $24 trillion — is the “largest and deepest bond market in the world,” according to a Wells Fargo research note.
They’re held by all sorts of global investors, like U.S. and foreign banks, insurers, retirement funds, mutual and exchange-traded funds, sovereign wealth funds and individuals.
Investors view them as a risk-free asset. Holding short-term Treasurys is theoretically “the one super safe thing you can do” with your money, Pugliese said.
“What does the world look like when nowhere is safe?” the economist said, posing a theoretical question.
In short: Investors might panic, dumping Treasury bonds and triggering a deep sell-off in stocks.
Ratings agencies would likely downgrade U.S. debt. Government borrowing costs would increase, as would those for households which have credit cards, mortgages, auto loans and other debt, which is linked to the U.S. Treasury market.   

‘The big question mark’ of who comes second

Bill Clark | Cq-roll Call, Inc. | Getty Images

Putting boldholders first inevitably puts others second.
Prioritizing who comes next is the “big question mark” in the grand scheme of unknowns, said Snyderman of the Bipartisan Policy Center.
All federal payments are on the table. Delays might initially last a day or two, but would grow along with the duration of a political impasse, she said.
The most consequential would likely be Social Security benefits and money for health programs like Medicare, Medicaid, the Children’s Health Insurance Program and Affordable Care Act health plans, experts said.
For example, the government is scheduled to pay roughly $100 billion each to Medicare and Social Security in June — dwarfing other federal payment categories, according to a recent Bipartisan Policy Center analysis.

We’re looking at some sort of contagion effect. The degree of contagion is unknown.

Rachel Snyderman
senior associate director of economic policy at the Bipartisan Policy Center

Deferring payments to federal health programs might mean, for example, that some health-care providers delay care for enrollees. Retirees, who may live on fixed incomes, may have trouble paying their bills, experts said.
Other payments might be affected too: federal tax refunds; the Supplemental Nutrition Assistance Program (also known as food stamps); payments to federal retirement plans like the Thrift Savings Plan; education programs like Pell Grants; federal salaries like those of judges and active-duty military members; veterans benefits; and payments to defense vendors and contractors, for example.
It’s unclear if the government would prioritize certain payments within these broad groups. The most likely scenario is funds would be issued chronologically according to when certain payments fall in the calendar cycle, experts said.
“It’s completely operationally, economically and legally untested,” Snyderman said. “We would be in uncharted territory.” More

As French citizens take to the streets to protest a higher retirement age, a similar change could happen in the U.S. with Social Security.
Here’s why experts say such a change would mostly affect younger generations.

A protestor holds a sign reading “64 years is a no” during a May Day (Labor Day) demonstration in Lille, France, on May 1, 2023, more than a month after the government pushed an unpopular pensions reform act through parliament.
Sameer Al-doumy | Afp | Getty Images

French citizens have taken to the streets to protest a pension retirement age increase to 64 from 62.
In the U.S., as discussions heat up about the need for Social Security reforms, some have also suggested raising the retirement age.

Such an adjustment would be unlikely to include current and near retirees. Experts say that may largely leave younger generations to pick up the tab on any coming changes to the program.
“All this stuff is coming back to haunt young people,” said Laurence Kotlikoff, a Boston University economics professor and Social Security expert.

“This is a time for young people — millennials — to take to the street and have a rally down in Washington, because this is generational expropriation,” Kotlikoff said.

Social Security to face key deadline in next decade

Social Security will face a critical inflection point in the next decade.
The latest projections from the Social Security board of trustees find the program’s combined fund will be depleted in 2034 — one year earlier than was projected in 2022. At that point, just 80% of benefits will be payable.

The program has been structured so that workers’ contributions through payroll taxes largely fund the benefit income for current beneficiaries. But with 10,000 baby boomers turning 65 every day — which is expected to go up to 12,000 per day in 2024 — the program is facing a shortage in funding.
The country has been here before. In 1983, changes were enacted to extend the program’s solvency including taxes on benefits and gradually increasing the retirement age.
Today, a higher Social Security retirement age is still getting phased in, with people born in 1960 or later having to wait until age 67 to receive their full “retirement age” benefits.

Anchiy | Istock | Getty Images

Some have suggested implementing a similar change again, with the idea that people are working and living longer.
That shift would be unlikely to draw the same outcry seen in France.
Yet experts say younger generations should take an active role in the discussions over how the program may be reformed.
“No one is talking about changing the [current] retirement age or doing anything that’s going to affect current retirees” or near-retirees ages 55 and up, said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.
“This is going to affect younger people, working-age people,” he said.

Effects of raising the retirement age

A recent Social Security panel hosted by The Century Foundation and New York University focused on the potential effects on another cohort, Gen Z, who were born from the mid-90s to mid-2010s.
While Social Security’s current dilemma will probably be fixed long before Gen Z is looking at retirement, they may bear the burden for the way the 20% to 25% funding gap is solved, said Laura Haltzel, senior fellow at The Century Foundation.
Today, Social Security claimants take reduced retirement benefits if they start at 62 or 100% of the benefits they’ve earned if they claim at full retirement age, which is transitioning to 67. But if they wait until age 70, they get 8% more per year.
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For example, if you are eligible for a $1,000 monthly benefit at full retirement age, you would get just $700 per month if you started at age 62. Alternatively, if you wait until age 70, you would get about $1,240 per month, Jason Fichtner, a former Social Security Administration executive and chief economist at the Bipartisan Policy Center noted during the panel.
Raising the retirement age would reduce benefits even further at age 62, for those earliest claimants who may not be able to afford to wait.
Consequently, it would be necessary to consider how such a change would affect high-income versus low-income claimants, Fichtner said.

‘There is no free lunch here’

Other changes could be on the table that broadly include increased taxes, benefit cuts or a combination of both. That could include raising the payroll tax rate — which is currently 12.4% evenly shared by workers and employers — or lifting the maximum wage income subject to those taxes, which is $160,200 in 2023.
If politicians cannot find either benefit cuts or tax increases palatable, they could turn to general revenue transfers, Fichtner noted.
That would amount to another $200 billion to $300 billion per year on top of the current $31.4 trillion national debt, he said.

“That means you’re piling on debt to the next generation,” Fichtner said. “There is no free lunch here.”
Other creative solutions could be implemented, such as a carbon tax or a financial transaction tax on stock sales, he suggested.
Social Security will likely still be around for younger generations. However, depending on what changes are made, younger cohorts may bear the financial brunt, Haltzel noted.
“As we’ve seen in the past, politicians like to inflict pain not on the folks who are retiring now but who are coming down the pipeline, and so you’re going to be firmly in the cross hairs,” Haltzel said to the Gen Z audience members. More