Americans feel significantly more confident in various areas of their lives apart from their finances, according to the Northwestern Mutual’s 2023 Planning & Progress Study.
More than one-third of those surveyed said that financial uncertainty keeps them up at night, at least monthly.
When asked to rate how strongly they feel about the current state of various areas of their lives, eight in 10 U.S. adults (79%) said they feel strongly or very strongly about their friendships; three-quarters said the same about their mental health (75%) and physical health (74%); and seven in 10 (69%) said the same about their job stability. However, only slightly more than half of the people surveyed (57%) said they feel strongly or very strongly about the current state of their finances. This is a relative weakness, compared to other parts of their lives.
“Given the uncertainty we’ve all experienced these past few years, it makes sense that some people are feeling less confident in their financial situation right now relative to other factors in their lives,” said Tim Gerend, chief distribution officer at Northwestern Mutual. “Finances are just one part of people’s lives, but they can have a real impact on overall wellness – especially if people are not sure whether they are making sound financial decisions.”
The arc of anxiety over finances
The study also found that financial anxiety tends to follow an arc as people move through life. In general, financial uncertainty is high for Generation Z, peaks for millennials, begins to recede for Generation X and sits at its lowest levels for baby boomers and older.
For example, more than one-third of Americans (36%) said that uncertainty about their finances keeps them up at night at least once a month. That percentage is even higher for Gen Z (44%) and is the highest among millennials (53%).
“The way our lives unfold, there are many unknowns when we’re getting started in our careers,” said Northwestern Mutual wealth management advisor Toby Eng, as he commented on the different levels of financial uncertainty among the different demographic groups. “Guaranteed income like a pension is becoming less and less available, and the burden to save is falling increasingly on the individual. Older generations may feel more secure because of some of those guaranteed income tools, especially if they’ve had a financial plan in place for some time. We know well that building positive financial habits early on can pay dividends and help alleviate some worries in the long run.”
The critical role of financial advisors
In addition, the survey noted that consumers who work with a financial advisor and those who identify themselves as disciplined financial planners are more likely to report greater feelings of strength about the current state of various aspects of their lives, both personal and professional, than those who do not.
“Having a financial advisor and doing disciplined planning helps in every area of life, and at every life stage,” said Gerend. “Just like building healthy habits can lead to better physical and mental health, remaining disciplined in financial behaviors can help improve people’s financial wellness. When people feel more secure in their financial situation, it frees up time and energy to focus on other parts of life that bring them happiness and fulfillment – whether that’s traveling, spending time with friends and family, or pursuing a hobby. Working with an advisor to create a comprehensive financial plan can be tremendously helpful in achieving that balance.”
Key elements of a comprehensive financial plan
What are some of the key elements of a comprehensive financial plan? “Using the analogy of a home,” Eng explained, “you want to make sure we have a strong foundation, as well as a beautiful, above-ground structure.”
Eng said a foundation includes:
Risk management, including health insurance, income-continuation planning, and survivorship planning. “Taking care of things that could be catastrophic to our plan frees us up to focus on the things that are important,” he said.
Emergency fund, including four to six months of expenses.
Legal planning (i.e., a will/trust, estate planning).
The 2023 Planning & Progress Study was conducted by The Harris Poll on behalf of Northwestern Mutual among 2,740 U.S. adults aged 18 or older. The survey was conducted online between Feb. 13 and March 2.
Ayo Mseka has more than 30 years of experience reporting on the financial-services industry. She formerly served as Editor-In-Chief of NAIFA’s Advisor Today magazine. Contact her at amseka@INNfeedback.com.
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