In Year 3 of Pandemic, Americans Less Confident About Financial Situation

Even though experts predict that the jobs market will improve and inflation will become more manageable this year, many consumers aren’t feeling great about their financial situations.

According to the 2022 Wealth and Wellness Index from Empower, a Greenwood Village, Colo.-based retirement services provider, and Personal Capital, a Redwood City, Calif.-based hybrid wealth management platform, only 34% of U.S. consumers say they feel very healthy financially. This statistic, which applies to November 2021 data, is a 14-percentage-point drop from 48% in March 2021.

Fewer Americans say they’ve achieved financial milestones

While 34% of respondents report feeling very healthy financially:

• 29% say they’re somewhat healthy financially (down from 30% in March 2021)
• 21% say they’re somewhat unhealthy financially (up from 13% in March 2021)
• 17% say they’re very unhealthy financially (up from 9% in March 2021)

Compared to the previous information from March 2021, a smaller percentage of Americans in November 2021 say they achieved key financial milestones. According to the index, fewer respondents report:

• Having an emergency fund (38% achieved this in November 2021, versus 50% in March 2021)
• Saving consistently (35% versus 45%)
• Making big-ticket purchases without worry (32% versus 40%)
• Hitting a certain net worth (23% versus 32%)
• Being able to retire when they want (35% versus 41%)
• Being debt-free (32% versus 39%)

Further, despite positive economic indicators — the U.S. unemployment rate beginning to normalize compared to the start of the pandemic, as an example — consumer confidence in the U.S. economy continues to dip. Just 40% of consumers in the fourth quarter of 2021 say they’re confident about the economy, down from 69% in the first quarter of 2020. Notably, consumer confidence is slightly higher at this time among millennials (ages 25 to 40), Black Americans and those earning more than $100,000 a year.

Are Americans thriving, surviving or just stable?

Further in the Wealth and Wellness Index, respondents are broken down into three groups based on their assessments of their financial health status:

• 36% say they’re thriving (described in the index as those with “increased freedom and reduced stress when it comes to money”)
• 48% say they’re stable (those with “the ability to meet planned and unplanned expenses as needed”)
• 16% say they’re simply surviving (those with “the ability to cover basic living expenses”)

More than 4 in 10 (45%) respondents who stated that they’re thriving say they have enough to spend on hobbies. Among this same group, 45% say they have enough money to spend on whatever they want without fretting, while 27% express never having to worry about finances.

In contrast are those who state that they’re merely surviving. Among these respondents, 72% say they can buy what they need to survive and 63% say they could handle a $100 expense without worry, while 51% feel their debt load is manageable.

There’s a middle category of Americans who aren’t thriving or just surviving — rather, they say that they’re stable. Just over two-thirds (67%) who say they’re stable report having enough to pay the bills. In addition, 57% within this group say they have some form of retirement savings, while 53% report having enough to cover a $500 emergency.

Salary is top factor in determining financial health

According to respondents, their salaries (44%), their ability to deal with unexpected financial needs as they come up (41%) and their savings account balances (37%) are the top factors in determining financial health.

Here’s what else is important, according to respondents:

• Retirement savings account balances (34%)
• A clear plan to reach financial goals (27%)
• Total net worth (25%)
• Investment or brokerage account balances (18%)
• Understanding how to advance (16%)

And amid inflation woes, it’s no surprise that U.S. consumers are worried their earnings won’t keep up with the rising cost of living. Here’s what respondents feel are the top barriers getting in the way of financial health:

• Not getting paid enough (30%)
• Having expenses constantly piling up (30%)
• Not being able to save (20%)
• Paying off health care-related expenses (17%)
• Being unsure about how to invest (17%)
• Feeling overwhelming stress around money (15%)
• Paying off student loans (13%)
• Not having a plan on reaching financial goals (12%)
• Not knowing how to manage money (10%)
• Lacking access to help (9%)
• Not knowing what financially healthy means (9%)
• Paying for child care (8%)

Paying off personal debt is a top priority

Despite looming worries and a dip in confidence about the economy, many U.S. consumers are optimistic about the future of their finances and are actively working toward making financial progress. In fact, 71% of respondents say they’re confident in their ability to meet money goals they’ve set for themselves, while 70% feel they’ll be able to build an emergency fund.

In addition, 68% say they’re confident in planning for retirement and 62% express sure-footedness in leveraging their financial assets to maximize their wealth.

So what are consumers’ top financial goals for 2022? Paying off personal debt, at 37%, is No. 1. Here are the other goals — money-wise and beyond — that are top of mind in the new year:

• Saving for retirement (36%)
• Exercising more (33%)
• Building an emergency fund (31%)
• Losing weight (28%)
• Getting a new car (17%)
• Buying a home (14%)
• Getting a new job (11%)
• Saving for or paying for college (8%)
• Retiring early (8%)
• Saving for or paying for child care (6%)
• Saving for or paying for a wedding (6%)
• Other (3%)
• None of the above (6%)

If paying off personal debt is a top priority for you this year, consider options to help you crush your debt quicker, such as debt consolidation. When you roll all your personal loan debt into a single loan, it could simplify your payments, lower your interest rate or monthly payment and help you pay off your debt quicker.

Methodology: Empower and Personal Capital — an affiliate of Empower — commissioned The Harris Poll to survey 2,006 U.S. adults ages 18 and older, fielded Oct. 29 to Nov. 3, 2021. This research also presents information from a previous study conducted from March 23 to April 8, 2021, as well as two additional ones conducted in November and December 2020 and December 2021, respectively.