1 in 3 Say Financial Life is Worse Than They Expect It To Be

Losing weight and quitting cigarettes may make way at the top of resolution lists this year. An annual survey from the National Endowment for Financial Education® (NEFE®) finds more than two thirds (68 percent) of U.S. adults will make a financial New Year’s resolution, to be financially fit in 2017, a sign that the majority of Americans remain focused on their financial health as much as their physical health. But regretfully the survey also finds that one in three (31 percent) rate the current quality of their financial life as worse than they expect it to be. The survey was conducted online in December 2016 by Harris Poll on behalf of NEFE, among more than 2,000 U.S. adults. They

Americans cited the most significant financial setbacks they experienced in 2016 as transportation issues (23 percent), housing repairs/maintenance (20 percent), and medical care for an injury/illness (18 percent). If faced with a major unexpected expense, over one third say they would pay for it with credit cards or an emergency savings—both at 35 percent—followed by cash at 32 percent.

“We have to stop looking at unexpected events as not if they will happen, but when they will happen. Everyone should have an emergency savings and it should be used for its intended purpose,” says Paul Golden, spokesperson for NEFE. “Ideally you want to build up to the benchmark of six to nine months of your annual salary in savings, but for many this amount seems unrealistic. Start with a small, achievable goal like $500 dollars, then set the bar higher.”

The survey also finds that nearly half (48 percent) of Americans admit that they are living paycheck to paycheck. The main reasons people believe they are living paycheck to paycheck are due to credit card debt (24 percent), employment struggles (22 percent), and mortgage/rent payments (18 percent). Compounding the uneasiness, over three quarters (78 percent) say something causes them financial stress. Saving money (53 percent) tops the list, followed by managing debt (44 percent).

Help Staying Accountable

As with any resolution, unrealistic and unreasonable goals are soon forgotten before January comes to an end. With financial resolutions, a buddy can help. A past NEFE study found 85 percent believe having someone who understands their financial goals and can assist in holding them accountable would be helpful.

“Your financial buddy can be anyone: a spouse, a trusted friend, a family member or a co-worker, and it doesn’t have to be someone with whom you share all of your financial information,” says Golden. “The greatest characteristics of a financial buddy will be someone who shares the same values and vision and someone who can bring perspective to the financial highs and lows that you experience.”

4 Tips for Financial Success in 2017:

  1. Get debt under control. Take a hard look at what you owe. If there’s a clear warning sign of too much debt, take action. Set a goal to reduce your debt load next year by 5 to 10 percent. That might mean reducing impulse shopping. Six in 10 people admit they purchase on impulse and 80 percent of those regret purchases afterwards. When you face temptation, walk away for at least 30 minutes and see if you still want it and it’s a good idea.
  2. Start saving now and do so often. We don’t yet know what an alternative to the health care system would look like. But what’s certain is that costs continue to climb, premiums are more expensive and copay’s are rising. Assume medical emergencies are not a question of if they will happen, but when. Emergency savings can offset unexpected costs. Common advice tells us we should have six to nine months of income set aside. Again, set a goal—start with as little as $500. Of course more is better, but by starting small you gain a sense of security, a sense of goal achievement, and you reduce stress. And we know the rules of retirement have changed. Review your long-term savings and ensure they are appropriate and on target.
  3. Shop for better services. Where can you come up with $500 for an emergency fund? Make a game out of shopping providers to find the best value in the services you use. How long has it been since you shopped your insurance policies? Any chance you can save money on your cell phone plan, internet or utilities? Go to your current providers and ask “what’s the best deal?” Also, be sure to understand your policy and services so that you are comparing apples to apples.
  4. Understand what’s behind your financial decisions. Ever wonder why you feel good about spending money on vacations, but avoid saving for retirement? Why you buy new golf clubs, but procrastinate when it comes to giving your kids an allowance? The answer may lie in your unique LifeValues and how they influence your financial decision making. Take the LifeValues Quiz.

For help with setting goals and getting finances in order in 2017, visit www.smartaboutmoney.org for resources, tips and self-directed courses.

Survey Methodology

The survey was conducted online within the U.S. by Harris Poll on behalf of the National Endowment for Financial Education from December 16-20, 2016, among 2,088 U.S. adults aged 18 and older. Data were weighted using propensity score weighting to be representative of the total U.S. adult population on the basis of region, age within gender, education, household income, race/ethnicity, and propensity to be online. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables, contact pdg@nefe.org.

About the National Endowment for Financial Education

NEFE is an independent nonprofit organization committed to educating Americans about personal finance and empowering them to make positive and sound decisions to reach financial goals. For more information, visit www.nefe.org.