State of personal finance in America

By Jessica Dosseh

In this article, we’ll cover:

• The current statistics around personal finance in America

• The factors putting pressure on Americans finances

• The rise of debt over the past decades

• The effect of money issues on mental health

• How different generations are positioned to withstand economic headwinds

The current state of personal finance in America is a mixed bag. On the one hand, some Americans are doing well financially, with low unemployment rates and rising incomes. On the other hand, many Americans are struggling with financial challenges, such as high levels of debt, stagnant wages, and rising living costs.

Personal finance in America is marked by high inequality and financial insecurity. Many Americans are living paycheck to paycheck, and many are unable to save for retirement or build wealth. The anxiety about money could potentially be generational – younger generations feel more anxious about money than older generations do.

One of the major challenges facing Americans today is high levels of debt composed of credit card debt, student loan debt, and mortgage debt, which can be difficult to pay off and can limit their ability to save and invest.

Additionally, the cost of living in America is rising, with many Americans facing high healthcare costs, rising housing costs, and increasing costs of education and childcare. This can make it difficult for many to meet their basic needs and achieve financial stability.

Overall, the current state of personal finance in America is complex and dynamic, resulting in financial challenges and obstacles.

The struggle with finances is real

According to the state of personal finance study, almost half (45%) of Americans said they have at least $1,000 in savings, and over a third (36%) have no savings at all.

The widening wealth gap and increase in income inequality have made it harder for most age groups. The rich are getting richer, while the poor and middle class are falling behind, while inflation continues to negatively impact the entire population. 59% believe they can’t get ahead with their finances—living paycheck to paycheck and not saving very much as a result which causes the majority to worry about the strength of the economy.

With prices rising on everyday goods and services, the average American is looking for ways to lessen the impact on their family’s budgets. Inflation has significantly changed how people shop for groceries, with 39% saying they cut back on non-essential grocery and food items. Despite these new changes in behavior, impulse purchases are still prevalent but cause people to feel more guilty.

The rise of debt

Over 70 million people now rely on credit cards more than before to pay their bills. This will most likely worsen as student loan payments restart after being paused since March 2020 due to the COVID-19 pandemic. Many borrowers are either somewhat worried or extremely worried about making their payments again.

One in five Americans have fallen deeper into debt since June 2022, and only 24% said they reduced their debt.

Money stress is impacting mental health

As the younger generations become more self-aware about the state of their mental health, there has been a noticeable shift, as many Americans say that their finances have had a negative impact on their mental health. Many of us feel the rise of anxiety attacks and stress brought on by money. Different age groups feel different levels of stress and anxiety when it comes to their finances. Younger generations are more worried about their finances than older generations, with 71% of Gen Z dealing with high levels of money stress compared to 42% of baby boomers. Boomers are close to or in their retirement years, and many have spent a lifetime building wealth and are currently tapping into social security benefits. With an overall higher net worth than younger age groups, they are more prepared and experienced to face the current economic downturn.

Gen Z, however, is currently focused on launching their careers or have barely entered the market. Gen Z is at the beginning of their learning journey and in the process of developing their perspective on money.

It may feel hard right now, but as we all continue to learn and develop our financial literacy skills, we will slowly move past the hardship and into a healthier state of personal finance.