Americans Remain Discouraged About Personal Finances

WASHINGTON, D.C. -- Americans remain guarded about their personal finances, with the majority (55%) saying their financial situation is “only fair” or “poor” rather than “excellent” or “good” (45%). More also report that their financial situation is worsening (50%) than improving (37%).

Consumers’ perspectives on their finances are nearly identical to what Gallup found a year ago but contrast with 2021, when Americans were generally upbeat about their financial circumstances and momentum.

One indication of what’s weighing on consumers comes from an open-ended question in the new survey that asks respondents to name the most important financial problem facing their family. Inflation tops the list at 35%, the highest percentage naming inflation as their biggest financial problem since Gallup first asked the question two decades ago. Although inflation has eased over the past year, it remains higher than Americans were accustomed to before the pandemic, and prices for goods like food and gasoline remain elevated.

The survey was conducted April 3-25, before the Bureau of Labor Statistics announced that inflation was 4.9% in April -- the first time it has been below 5% in two years.

Americans’ Financial Assessments Near Two-Decade Low

An index summarizing the two financial assessment questions shows that consumers’ overall attitudes about their finances are essentially tied for the most negative they’ve been since Gallup began tracking these metrics annually in 2004. The index represents the average of Americans’ net positive evaluations of their current financial situations (the percentage rating them excellent/good minus the percentage only fair/poor) and their net positive outlook for their finances (the percentage saying their finances are getting better minus the percentage saying they are getting worse).

Today’s -12 score is the lowest since 2008 and 2009, when the financial index was at its numerical low point of -13 in the trend. Thereafter, the index gradually climbed to a high of +21 in 2019 before tumbling to -9 at the start of the coronavirus pandemic in 2020.

The index spiked to +18 in April 2021 -- a hopeful period for consumers during the vaccine rollout and as the economy was getting back to normal -- nearly matching the 2019 high. But it fell to -10 in 2022 amid high and worsening inflation and is essentially the same this year.

Middle-Income Americans Express Record-Low Financial Confidence

As usual, there are sharp differences in how adults of different household income levels view their financial situation. The financial index score is positive (+28) among those in the top third of households by income (currently those earning $100,000 or more annually), while it is modestly negative, at -22, among middle-income earners ($40,000-$99,999) and more deeply negative, at -43, among the lowest income tier (less than $40,000).

All income groups’ financial confidence was shaken in 2020, improved in 2021, and dropped again in 2022. However, over the past year, financial confidence has fallen further among middle-income Americans to the lowest Gallup has recorded for that group in the two-decade trend, while it has been steady among upper- and lower-income earners.

Despite evaluating their personal finances as subpar, most adults still report they have enough money to live comfortably; however, the 64% doing so this year is among the smallest proportions Gallup has recorded in two decades of tracking.

Lower- and middle-income Americans’ comfort with their financial means is at new lows in 2023, while upper-income Americans’ sentiment is closer to the long-term average for that group.

Financial Worries Largely Stable

The same poll tracks Americans’ level of worry about eight different financial risks. Of these, not having enough money for retirement is the most troubling to Americans, with 66% saying they worry a lot or a moderate amount about it, followed by 60% worried about paying medical costs in the case of a serious illness or accident. These two financial challenges have topped the list of financial worries each year Gallup has tracked this since 2001. Worry about maintaining one’s standard of living is also above the majority level, at 57%.

Less than half of Americans worry about each of the remaining five financial risks, ranging from 46% worried about being able to afford their normal healthcare to 25% worried about making minimum payments on their credit cards.

This year’s results are similar to last year’s, except with a slight increase in the percentage worried about maintaining their standard of living, up five percentage points to 57%. However, financial worry on all of the items is on the high end of the historical trends, similar to the record-high levels last recorded in 2012 or 2011.

A year into rising inflation in 2022, Americans’ worry about maintaining their standard of living, paying their normal monthly bills, meeting their housing costs, and saving for retirement had risen to levels not seen in several years, and those concerns have not abated.

Bottom Line

Although inflation is down sharply from a year ago, it remains high relative to what Americans have been accustomed to in recent decades. Given that, inflation continues to be both a top-of-mind financial concern as well as a likely driver of continued pessimism and uncertainty among Americans about their own finances.

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