Financial Stress Rings in the New Year
Having dug ourselves out of the worst financial crisis since the Depression, the nation entered 2017 amid rising wages and record-low unemployment. Yet three out of four adults report being “financially stressed.”
And no wonder: half of the 2,000 adults in the December survey by the National Endowment for Financial Education (NEFE) said they are living paycheck to paycheck.
Americans’ specific financial issues are routinely documented in this blog and run the gamut from cash-flow shortages to poor retirement prospects.
The primary sources of financial stress identified in the NEFE survey were not enough savings and too much debt. This was consistent with a second finding in which respondents said that solving these issues would also provide the most “financial relief.” Here are the other findings:
- A higher income provides little protection. While 85 percent of adults earning under $50,000 per year report being stressed, the percentages don’t improve much for people earning $50,000 to $74,900 (80 percent are stressed) and $75,000 to $99,999 (79 percent).
- In every single income bracket, saving is a problem for more than half of adults – even those earning more than $100,000.
- The bulk of their major “setbacks” in 2016 involved routine expenses: car repairs and other transportation issues, home maintenance and repairs, and medical care.
Here’s more detail from the adults who report living paycheck to paycheck:
- More women are in this situation: while 45 percent of men live this way, 51 percent of women do.
- Credit cards are blamed for being the primary reason that 24 percent are living paycheck to paycheck. The other big reasons are “employment struggles” (22 percent),” paying the rent or mortgage (18 percent), and health care costs (10 percent).
Only 15 percent of Americans rate the quality of their financial lives as “better than expected.” The question for most everyone then is: will they be better off at the end of 2017?
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I understand financial stress. I’ve been there in my 20’s and again in my 50’s. I got through it by scrimping and my wife’s ability to budget and balance the checkbook. I have to ask where is the paycheck going besides housing, utilities and food?
A family I know is stressed, yet they spend like there is no tomorrow: monthly fees for subscriptions/memberships to a car wash, Netflix, Amazon Prime, extra channels on cable TV, several cell phones, magazines, and clubs.
Financial education about budgeting and delaying gratification might help some folks reduce their stress.
Money management courses and budget training should be a prerequisite for a high school diploma.
The issue is that, culturally, we’ve become inured to living beyond our means. In the 1970s (and prior), employing debt — outside of buying a house — was almost unheard of. Now people have access to all sorts of vendor-finance, store cards, credit cards, home equity release, you name it. Is it any wonder these numbers of people are stressed?
The chickens are fast coming home to roost. There are ugly years ahead. People suggesting that ‘budget training’ will address this issue have their head in the clouds. The problem is way more fundamental than that and big changes to the way we live today are coming down the pike.
In this day and age, banks have a lot to answer for in regards to putting great numbers of people into financial stress. Easy credit, giving loans to people who shouldn’t qualify, etc. Yes, I know that people should say ‘no’ to their banks, but often the pull of ‘keeping up with the Jones’ can be mighty strong.
I also think there is certainly a lack of basic financial education given to people when they are growing up. With a bit more knowledge, it can be easier to avoid the trap of getting into debt up to your ears.
Financial stresses can be a matter of happenstance, but are too often a matter of choice. Unfortunate financial consequences happen to everyone, but there probably are more self-inflicted financial injuries than there need to be.
“Credit cards are blamed for being the primary reason that 24 percent are living paycheck to paycheck.” What people need to understand is that borrowing money is a conscious act of committing tomorrow’s income to meet today’s needs. No one knows what tomorrow will bring (good times or bad), but it’s a pretty good bet that you’ll need tomorrow’s income for tomorrow’s needs. If you’ve already committing today’s income to yesterday’s purchases, you might not have the means to manage today’s needs.