More than a quarter of Americans say their personal financial situation has improved in the past year but a wide majority fear the country may slide into recession in the year ahead, according to new study by MDRT (Million Dollar Roundtable).
Moreover, the survey indicates people would prefer personalized financial advice rather than relying on digital platforms or supposedly universal rules and recommendations on household spending.
“The possibility of recession has clearly come home for most Americans, and consumers are looking for ways to staunch the bleeding” said MDRT First Vice President Greg Gagne.
“The possibility of recession has clearly come home for most Americans, and consumers are looking for ways to staunch the bleeding.”MDRT First Vice President Greg Gagne
Though wage growth accelerated in the years leading up to the COVID‐19 pandemic, real incomes fell for most Americans in the past year. Only 18% say they received a raise that made up for inflation, with men (23%) significantly more likely to report a raise in real terms than women (15%). Another 29% of Americans say they received a raise that did not make up for inflation, and a 38% plurality say their wages have not changed in the past year. Seven percent of Americans say the past year saw their wages decrease.
When asked to name their top three increased expenses for essential goods, 78% of Americans said groceries, 70% chose gas prices, and 39% pointed to their electric bills. Certain other expenses fell harder on different demographic groups: 27% of Generation Z and 22% of millennials identified rising housing costs, while 17% of Americans with at‐home dependents identified childcare.
Under this increased financial stress, only 38% of Americans say they have at least six months of income in easily accessible savings, with strong differences between racial communities. Forty‐two percent of white Americans say they have at least six months of savings, compared with 35% of Asian Americans, 26% of Hispanic Americans and just 16% of Black Americans.
“Building a sufficient emergency fund is a critical first step toward long‐term financial security, and financial advisors will have to get creative to help their clients reach this first benchmark,” Gagne said.
While the survey did not specifically ask about financial advice, MDRT says it came to a conclusion that most people preferred personalized consultation rather than relying on stock-in-trade savings dictums.
'Everyone's situation is unique'
“We often hear pop culture financial ‘experts’ say that those looking to save money should eat out less or stop buying Starbucks, among other more universally reaching adages,” said Zach Hamilton, a spokesman for G&S Business Communications, which fielded the study for MDRT. “However, the data from the survey show that everyone’s situation is unique, a lot of people say they can’t follow these adages or already are.”
The survey results reveal many Americans either reject such basic strategy recommendations, or say they are not applicable to their individual situation, underscoring the need for financial advisors to avoid such “universal” guidance.
“In an era where social obligations and interactions often require spending money, financial advisors should not be surprised when their clients say they cannot reduce some kinds of ‘non‐essential’ spending,” says MDRT Immediate Past President Randy Scritchfield. “Rather than attempting a one‐size‐fits‐all solution, advisors must meet clients where they are and find the best fit for their holistic well‐being.”
For example, a full 38% of Americans say they cannot cut spending on caffeinated or energy drinks during a recession. Baby boomers are the most resistant, with 43% saying they cannot cut back, compared with 38% of Generation X, 29% of millennials and 27% of Generation Z.
Some won't cut back on hobbies
Twenty percent of Americans say they cannot cut back on hobby‐related spending, like exercise, video games, or recreational classes. Younger Americans are more resistant, with 25% of Generation Z and millennials saying they cannot cut back, compared with 18% of baby boomers and 16% of Generation X
“This indicates that these universal pieces of advice aren’t as effective as many may think, and it truly takes a more personalized, individualized approach,” Hamilton said.
Rising childcare costs have garnered increased attention from economists, financial advisors and politicians in recent years. With the trend showing no signs of letting up, 16% of Americans with at‐home dependents say they have left the workforce because childcare was too expensive. Slightly more women (18%) than men (13%) say they have left the workforce for this reason.
Another 10% of Americans with at‐home dependents say they would consider leaving the workforce, and another 8% say their partner would if childcare costs continued to rise. These figures indicate that childcare costs are having a substantial impact on the size of the American workforce, as these figures do not include parents who left the workforce for other reasons, like cultural beliefs or disability.
This online survey was conducted on Aug. 31, 2022, with a representative U.S. sample of 1,326 adults, ages 18+, including 644 who reported having children or adult dependents in their households. The sample was balanced for age and gender using the Census Bureau’s American Community Survey to reflect the demographic composition of the United States.
Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].