By many accounts, the American economy is doing pretty well. The stock market is at an all-time high and unemployment sits at just 3.9%, both numbers that are especially impressive given that we are approaching the third year of the COVID-19 pandemic which has caused massive interruptions to normal life, including financially. Still, a recent survey from retirement services provider Empower Retirement and financial services company Personal Capital finds that only 34% of Americans consider themselves “very financially healthy,” a 14% drop from March 2021.
“It’s a fact of life that forces in the economy are going to impact how confident people feel about their finances,” said Empower President and CEO Edmund F. Murphy III in a press release. “Periods like this represent opportunities for savers to become even more engaged in their finances and seek the advice they need to help reassure them in their financial plan or put them on a path to help drive renewed confidence.”
If you want help making sure you’re financially secure for the future, consider finding a financial advisor using SmartAsset’s free financial advisor matching service.
Why Are People So Unconfident?
There isn’t a simple explanation as to why so many people are losing confidence in both their personal financial situation and the economic picture for society as a whole. There are a few economic indicators, though, that may give at least part of the picture.
“It’s a complicated picture to describe what’s happening to the economy,” says Craig Birk, chief investment officer at Personal Capital. “The labor market is strong and retail growth is ticking upwards, but we’re also dealing with recent market volatility and record high inflation. It’s unsettling for many.”
Inflation especially has been in the news a lot in recent months, and it can certainly cause people to feel as though the money they have won’t go as far towards meeting their needs, let alone allowing them to save for the future. Experts are divided as to what inflation will look like on 2022, so this concern may or may not come to bear.
What You Need to Feel Financially Secure
At the end of the day, only one thing really makes people feel financially secure — having enough cold, hard cash on hand to guarantee you can weather most storms that life may throw at you or at society as a whole. This begs the question, then — how much money does it take to feel financially secure?
The survey found that a person needs to earn $128,000 a year in order to feel financially secure. Of course, this number may be impacted by any number of other factors including the cost of living where you reside, potential family money and previous savings. Still, that is a fairly high number — the Census Bureau found that the median household income for 2020 was just $67,521.
What Are Americans Doing for Financial Health in 2022?
Even though many Americans don’t feel financially secure, that doesn’t mean families aren’t taking steps to get more financially healthy in the coming year.
According to this study, the following are the top five financial goals Americans have for the coming year:
1. Paying off debts
2. Saving for retirement
3. Building an emergency fund
4. Getting a new job
5. Paying for college
Other goals that aren’t about personal finance include losing weight, exercising more, buying a new car and purchasing a home — though, of course, all of these can indirectly impact a person’s personal finances.
The Bottom Line
Though there are some good markers to the economy right now, many Americans don’t feel financially secure, and that number has actually dropped since last year. In fact, you need to earn $128,000 a year to feel financially secure, nearly double the median household income nationwide.
Financial Planning Tips
- A financial advisor can help you build financial confidence. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Even if you do nothing else, make sure to take advantage of a workplaces retirement plan like a 401(k) if you have access to one. If not, consider opening an individual retirement account (IRA).