With millions of Americans devoting a new interest to personal finance — due to the pandemic — one might wonder what it actually takes to reach financial wellness.
A new survey from Empower Retirement and Personal Capital, a retirement plan provider and wealth management company, respectively, found that the majority of Americans agree that their financial health is connected to their overall happiness (57%) as well as their physical and mental health (77%).
And even though 6 in 10 believe they have the ability to achieve financial health, only 48% of them believe that they're financially healthy today.
Americans tie the concept of financial well-being to their feelings and emotions
Many Americans seem to have a clear understanding of what financial wellness is, but they're less clear on what exactly it will take to achieve it. The survey showed that:
- 78% of respondents believe their net worth is an important number to track
- 73% of respondents believe their net worth is a top indicator of financial health
However, just two-thirds of them know what their net worth actually is. Instead, for the majority of survey participants, their markers for financial wellness were rooted in more abstract concepts like their feelings and peace of mind. For instance, these respondents shared sentiments such as:
- "There is no one definition for financial health; it looks different for everyone" (83%)
- "I will feel financially well when I have the freedom and ability to spend how I want to" (81%)
- "Financial health is more of an ongoing journey" (72%)
Similarly, 67% of consumers reported that having enough to pay their bills was the most important indicator of good financial health, followed by having enough money in their accounts (66%) and being able to spend recreationally without worrying about it (57%).
Despite mounting challenges, respondents are determined to improve their finances
According to the joint survey, the majority of Americans are having trouble reaching financial well-being. More specifically, 69% of respondents are experiencing at least one obstacle on their journey to financial health, with the top two barriers being not earning enough income (27%) and constant expenses (23%).
A separate Northwestern Mutual survey found that consumers are having a hard time planning for their long-term finances, too.
Perhaps because of these challenges, 78% of survey participants acknowledge they need help improving their financial situation, particularly in the following areas:
- Paying off debt (32%)
- Building an emergency fund (30%)
- Creating an investment strategy (28%)
- Planning for my entire household's needs (24%)
- Saving for large purchases (24%)
In the meantime, though, consumers continue to do what they can to better their financial well-being. The survey indicated that about 4 in 10 respondents are spending less on nonessential items (39%) and focusing on saving (40%).
A different survey from Coinstar reported similar findings: About 7 in 10 Americans have improved their budgeting and saving habits during the pandemic.
Methodology: The Harris Poll conducted this survey from March 23 to April 5, 2021, on behalf of Empower Retirement and Personal Capital.
It surveyed 2,005 U.S. adults (ages 18 and older) who were either retired or employed full time and not currently working in sensitive industries. The report defines sensitive industries as financial services or wealth management industries where a potential conflict of interest may take place.