Four in 10 Americans don’t believe they’ll achieve financial independence within the next five years, according to a new survey. Additionally, 42% of respondents have experienced significant financial setbacks in the past three years.
The survey of 2,000 Americans found that an increased cost of living expenses (68%) was the primary culprit. Other setbacks were found to be unexpected medical expenses (59%), pay cuts (53%), and job loss (49%), with many also saddled with high levels of personal debt (41%).
But it’s not all doom and gloom, as an impressive nine out of 10 who experienced financial setbacks also stated that they have started their journey to recovery.
Sticking to The Budget
The survey, conducted by OnePoll on behalf of Prosper Marketplace, found that the most effective path to financial recovery was simply sticking to a budget (72%). That was followed in popularity by securing new employment or exploring supplementary sources of income (56%).
Another 56% of participants said they implemented debt management strategies and repayment plans to regain their financial stability. Over half of the respondents (51%) have set their sights on becoming debt-free as part of their long-term plans.
In terms of lowering debt, many (69%) suggest transferring credit card balances to lower-interest cards. Six in 10 would also consider transferring credit card balances to a new card offering a low or 0% APR on balance transfers for a limited time.
“Refinancing debt to lower interest alternatives is a smart move,” said David Kimball, CEO at Prosper, a consumer fintech company. “We see people consolidate debt using unsecured personal loans, home equity lines of credit, or home equity loans. Homeowners can access larger loans at better rates secured by their home equity, without having to sacrifice their low mortgage rate with a cash out re-fi.”
Improving Financial Control
The top three strategies to improve their own financial control were found to be prioritizing saving and establishing an emergency fund (54%), setting clear financial goals and formulating plans to achieve them (53%), and diligently creating and adhering to a budget (43%).
For long-term plans, four out of ten respondents expressed a desire to buy a house or property, establish an emergency fund, and save for retirement. Additionally, 49% of respondents have chosen to invest in stocks, bonds, or mutual funds, while 42% have explored alternative investment options like real estate investment trusts (REITs) and peer-to-peer lending.
And if people had additional funds, they said they’d invest in assets paying regular dividends (51%), alternative investments such as real estate and peer-to-peer lending (49%), and rental property (35%). “With recent market volatility, there’s been increased interest in alternative investments, like peer-to-peer lending, that can provide a passive or secondary income stream,” Kimball said.
Additionally, 38% of those surveyed have the ambitious goal of venturing into entrepreneurship. A notable 50% of those polled have already done so, by creating and selling digital products.
Top Financial Instruments People Would Use To Resolve a Potential Financial Setback
- Savings or emergency funds – 51%
- Credit cards – 46%
- Home equity loans or lines of credit – 42%
- Personal loans – 41%
- Tapping into retirement savings (e.g., 401(k), IRA) – 26%
Best Strategies To Gain More Financial Control
- Prioritizing saving and building an emergency fund – 54%
- Setting financial goals and establishing a plan to achieve them – 53%
- Creating and sticking to a budget – 43%
- Paying off debts and managing loans effectively – 40%
- Seeking financial advice or consulting with a financial planner – 17%
Top 5 Things People Would Invest in if They Had Funds
- Investments paying regular dividends – 51%
- Alternative investments such as real estate investments trusts (REITs) and peer-to-peer lending – 49%
- Rental property – 35%
- Annuities – 32%
- Bonds and Treasury securities – 26%
This random double-opt-in survey of 2,000 Americans was commissioned by Prosper between June 13 and June 16, 2023. It was conducted by market research company OnePoll, whose team members are members of the Market Research Society and have corporate membership to the American Association for Public Opinion Research (AAPOR) and the European Society for Opinion and Marketing Research (ESOMAR).