Level of financial insecurity remains high, study finds

Even though Americans have a more optimistic view of the direction of the U.S. economy than they did a year ago, their feelings of financial insecurity have hit a record high, according to Northwestern Mutual’s 2024 Planning & Progress Study.

According to the research, just over half (54%) of U.S. adults think that the U.S. will enter a recession this year. While this number still represents a majority of adults, it’s still a big drop from the two-thirds (67%) who predicted a recession last year, the survey pointed out. These more positive economic expectations were seen across generations, with double-digit increases in optimism seen among Gen Z, millennials, Gen X and boomers alike.

At the same time, Americans’ feelings of personal financial insecurity are on the rise. One-third (33%) of adults said that they do not feel financially secure. This represents a jump from 27% who said the same last year and is the highest level of insecurity recorded in the study’s history. The Northwestern Mutual Planning & Progress Study started in 2009 and began measuring financial security using its current methodology in 2012.

Reasons for the jump in financial insecurity

So, what is causing this decline in Americans’ level of financial security?

“After a global pandemic, market volatility, and now persistent inflation, financial shock fatigue is setting in,” said Northwestern Mutual Managing Director Andy Jones. “Americans have had to adapt again and again to significant challenges in recent years, and they assume another major obstacle is around the corner. They’re worried about their ability to persevere again. They’re also concerned about the impact that continued inflation, government dysfunction and the 2024 presidential election may have on their near-term finances. It’s important to remember, though, that there are still great opportunities to save for the future and invest in this environment.”

Decline seen in number of disciplined planners

The survey also showed a continued decline among Americans who consider themselves “disciplined” financial planners – from 65% in the post-Covid 2020 study to 45% in 2024. And although Americans are experiencing levels of insecurity, many don’t expect to largely pull back from their spending on discretionary things like restaurants, vacations, and entertainment this year. The research finds that 59% of U.S. adults said they’ll either spend the same or more on these purchases year-over-year, while just under four in 10 (37%) said they’ll spend less. Among the generations, Gen Z is the most likely to say they’ll increase non-essential spending, while Gen X is the most likely to say they’ll be tightening their belts.

There are several reasons for this lack of financial discipline. “The pace and scale of change in people’s lives have been significant,” explained Jones. “As people try to make sense of it, it leads some into analysis paralysis. Without outside help, it can be difficult for people to keep pace with these decision-points, and to make good choices. All of that takes a toll on people’s financial discipline. However, an intentional financial plan that reflects someone’s goals and can accommodate a variety of economic seasons should help people maintain discipline and reduce feelings of insecurity.”

Jones said that every day, he sees the impact that financial advice and comprehensive planning can make on people’s lives. Americans who have a financial plan and an advisor are much more devoted to good financial habits than people who don’t have either one, he added. And people with an advisor understand how much they can spend today without sacrificing their future goals, they stay committed to their investment strategy, and they keep their insurance policies in-force.

Jones added that when people have a plan that protects what they’ve already built and also creates future prosperity, that creates confidence and keeps them motivated to stay on track. “My advice to other advisors is to go above and beyond this year – help more people to build financial security and grow your sphere of influence to serve underserved markets,” he added. “Our work is making a positive and lasting impact on people’s lives – but there are millions more who are uninsured, underinsured and lacking a plan for the future.”

The online 2024 Planning & Progress Study was conducted by The Harris Poll on behalf of Northwestern Mutual among 4,588 U.S. adults aged 18 or older between January 3 and January 17, 2024. A complete survey methodology is available.

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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