A new study from CNBC and Momentive reveals that an alarming 70% of Americans are dealing with financial pressure due to increasing costs and stagnant wages, and the situation is only worsening.
Financial stress is becoming nearly unavoidable in today’s world.
As the Federal Reserve continues to battle inflation, many Americans are turning to the savings they built up during the pandemic. But their savings won’t last forever, and with stubbornly high prices, the stress is mounting.
Sadly, no one is immune, as every income range reports stress, various types of debt, and dwindling savings. People must first understand they aren’t alone in needing to improve their finances and reduce their stress levels. Many others are struggling, too.
Many Factors Contributing To Stress
There are many reasons why people cite financial stress. Still, the overarching theme is that stress is considerably higher than before the pandemic in 2020. Overall, 78% of people are as stressed or more stressed than before.
Broken down by income group, 55% of those earning less than $50,000 are more stressed, and 56% of those earning between $50,000 and $100,000 are more stressed.
Even among those with incomes over $100,000 a year, 46%, report higher stress. Reasons why people feel financial stress include inflation at 59%, economic instability at 43%, higher interest rates at 36%, and a lack of savings at 35%.
Respondents cited oher issues including aging, layoffs, medical bills, credit card debt, and student loans.
Debt Remains an Issue
Debt remains an issue for most Americans, regardless of income. Those earning less than $50,000 per year report having the following types of debt:
- Credit card debt: 42%
- Auto loan: 30%
- Medical debt: 28%
- Personal loans: 21%
- Student loans: 19%
- Mortgage: 15%
Those earning between $50,000 and $100,000 report having:
- Credit card debt: 52%
- Auto loan: 42%
- Mortgage: 39%
- Medical debt: 23%
- Personal loans: 22%
- Student loans: 22%
And those with an income greater than $100,000 have the following debt:
- Mortgage: 56%
- Auto loan: 44%
- Credit card debt: 42%
- Student loans: 22%
- Personal loans: 19%
- Medical debt: 12%
People carry different non-mortgage debt levels, with 37% having less than $10,000 in debt and 42% having between $10,000 and $50,000. These numbers include student loan debt, which tends to be the most significant debt obligation outside of a mortgage. With prices outpacing wage growth, many wonder how to get out of debt when they must keep adding to their balances.
Savings Balances Are Healthy for Those With Savings
The savings rate of Americans increased during the pandemic, but this trend has flipped, and most people are now using their savings to survive. Fifty-three percent of people with an income below $50,000 have less than $5,000 in an emergency fund compared to 12% of those earning $100,000 or more.
Overall, 38% of all income groups surveyed have more than $20,000 in savings, which includes 17% of those earning less than $50,000 annually. The troubling news is, according to JP Morgan, total savings have declined from a high of $2.1 trillion during the pandemic to around $900 billion.
Is More Money The Answer?
When asked how much money they would need to feel comfortable, 54% said between $100,000 and $500,000. Another 20% said $1 million or more. However, for those earning below $50,000 annually, 59% would be comfortable with between $25,000 and $100,000.
Improving Finances Requires Patience and a Plan
Improving a person’s financial situation requires a plan to be successful over the long term. For many, it starts with a budget or a method of tracking spending. Once there is an understanding of where money is going, the person can begin making changes.
However, this is more complex than it might sound. There are many different strategies to improve one’s financial picture, and without the proper education, they can be confusing. This confusion is why Dave Ramsey’s baby steps are so popular. It’s a clear plan with zero exceptions, so a person can easily follow along and know where they stand.
A Troubling Trend
While following a seasoned personal finance expert like Ramsey is an intelligent move, a concerning trend is the rise of TikTok influencers spouting financial advice. These videos receive millions of views from people looking for financial help.
The issue is there is zero vetting of the influencer, so the person following along does not know if the influencer is promoting a product or service and receiving compensation. Worse, they may go viral because of the video style, and there’s no proof the adviceworks. As a result, a follower could be attempting to budget or save $100,000 in a way that hurts them in the long run.
Most people need to remember they did not get into financial trouble overnight and will not get out of it quickly either. But with patience and hard work, they can improve their finances and enjoy the fruits of their labor.