It should surprise no one: Americans are under a lot of financial stress.
In recognition of April as Stress Awareness month, CFP Board recently conducted a nationwide survey of approximately one thousand adults, aged 18 and older, to determine the level and kinds of stress they were experiencing when it comes to managing their money. Except for a small, blissful minority (14 percent), respondents overwhelmingly reported experiencing financial stress of one form or another.
While the top three sources of stress reported in the survey were attributable to debt, day-to-day expenses, and health costs, financial stress is by no means an equal opportunity event. It can work somewhat like the ‘flu: there are different strains of stress, and certain demographic groups are at greater risk than others. Women are one such group, stressing about some aspect of their finances more than do men (89 percent versus 83 percent). Women are also more likely than their male counterparts to be afflicted by the strain of stress arising from everyday expenses. Almost a third of women respondents admitted to feeling stress “all of the time” compared to 21 percent of men.
Younger Americans, too, bear a disproportionate amount of financial stress compared to those aged 45 or older. Fully 90 percent or more of respondents ages 18 to 44 report feeling financial stress, whereas once individuals hit their mid-forties, the percent of those experiencing stress drops to 84 percent, and reaches its lowest level (78 percent) in the years after 64. This finding might give new meaning to the idea of retirement “security”: once in their golden years, people finally stop worrying so much about money. There is one exception to this golden rule, however: Older people do fret more about health care expenses than do twenty-, thirty-, and forty-year olds. Meanwhile, for the youngest Americans, ages 18-34, worry about health care is negligible, whereas higher education costs weigh heavily on their minds.
So given the pervasiveness and variety of financial stress, is there any hope for a cure? Or is it – again like the ‘flu – an affliction which keeps mutating and changing, outpacing any certain and one-time remedy?
Survey respondents voted on a variety of stress-reducing measures, chief among them having a financial plan and being more knowledgeable about financial planning topics, such as investing, insurance, tax and retirement planning. They also coped with bouts of financial stress primarily by tightening spending and monitoring their wealth accounts more frequently.
But more can and should be done by Americans to deal with financial stress. Here are some observations, arising out of the survey, to consider:
- Financial planning, the most frequently cited mitigator of stress, is also a way to prevent it, particularly as it arises in different forms for different ages. Planning, by definition, is a way to prepare for life’s more stressful events, thereby enabling planners to take these events in stride. While everyday bills, college costs, medical expenses and retirement are necessary fixtures of our lives, they need not be negative ones, IF we plan for their costs and impacts.
- Planning is best undertaken under the guidance of a CFP® professional. A Certified Financial Planner ™ professional is qualified by training and experience to look “around the corners” and see both the financial opportunities and threats that arise in everyone’s life journey. As the survey indicated, many respondents lack the requisite knowledge about all the facets of financial planning. Certainly a major source of stress comes from not knowing or understanding how markets, tax laws, retirement plans and pensions, wills and trusts work. Hiring a trusted expert who does is the best way to boost confidence that you are making the most of your financial resources.
- Both women and young Americans need to acknowledge and address their higher levels of financial stress, and take proactive steps to deal with it. For both groups, this means taking a longer-term view of financial management: focusing beyond the day-to-day, and preparing realistically and intelligently for the future. Young people, for example, should not ignore the reality of eventual health care needs, and should create emergency reserves and buy needed insurance to offset possible expense in this area. Women need to learn more about investing, and how to benefit from rather than stress about, market volatility. They also need to recognize that that the costs of retirement will be greater for them than for their male counterparts, and correspondingly make sure that in the day-to-day management of finances, they are also setting aside funds for themselves and their later years.
- The biggest reported financial stressor – debt – is also one that can be eliminated or markedly reduced by developing responsible habits of spending and saving. Recognizing that too much debt can be the 1000-pound gorilla on one’s back, affecting virtually all other financial areas of life – the ability to rent, to buy a home, to get and keep a good job, to participate fully in a retirement plan – makes this stressor a priority to deal with. A CFP® professional can help, as can a call to the National Foundation for Credit Counseling.
A final takeaway: recognize that there can be a positive side to stress, IF it serves to motivate us to take corrective action. So consider: what one or two actions can you take today, to diminish the financial stress of tomorrow?