Imagine waking up every morning with a knot in your stomach, wondering if you’ll ever feel financially secure. For 33% of Americans, that’s not just a thought — it’s their reality; the highest level of financial insecurity recorded in the North Western’s Planning & Progress Study history.
In 2024, despite a notable decline in the percentage of Americans anticipating an impending recession (down to 54% from 67%), a paradox emerges. While optimism regarding the trajectory of the United States economy is on the rise, sentiments concerning financial insecurity surged from 27% last year to an unprecedented, record-high peak.
“’Financial shock fatigue’ and fragility are holding people back from positive feelings about their financial security. Despite the growing economy, Americans have had to endure one financial disruption after another over the last several years, and it’s hard to feel positive when you don’t know what’s around the corner,” says Christian Mitchell, Chief Customer Officer at Northwestern Mutual.
“The pace and scale of the financial uncertainty around them are leading to greater anxiety, analysis paralysis, and an overriding sense that they’re constantly reacting instead of controlling their destiny.”
Inflation Still Primary Consumer Concern
Financial woes remain at the forefront of most American adults’ minds, primarily driven by inflation concerns.
One-third of U.S. adults report financial stress, a notable jump from just 27% who felt similarly in 2023. The new numbers represent the highest level of insecurity recorded in the study’s history.
Inflation significantly impacts households by eroding purchasing power. Consumers increasingly find that their income covers less than it once did. This discrepancy leads to reduced living standards, savings, and investments. Just 9% of Americans claim their household income surpasses inflation rates, highlighting the ongoing imbalance between sky-high costs and stagnant wages.
Respondents of a Tampa Bay Times survey report experiencing inflation’s effects in various life aspects. Around 65% report a strained ability to cover monthly bills, with a similar proportion note affected travel plans and reliance on personal savings to combat increased costs. Additionally, 87% indicated reduced discretionary spending, 60% admit to saving less money for emergencies than last year.
Though many fingers point at inflation, some experts claim corporations engage in what critics call “greedflation” — a practice wherein price hikes are primarily profit-driven, resulting in substantial CEO and shareholder payouts.
A Harvard Business School study orchestrated by the Pricing Lab found that corporations test consumers’ comfortability threshold by strategically raising prices; brands push prices higher to squeeze the absolute most money out of consumers. The White House Council of Economic Advisers states that large grocery retailers’ elevated profit margins contribute to high food costs.
Disapproval of U.S. Government Influences Financial Decisions
Participants ranked their financial concerns for 2024. Respondents cite “inflation” as their primary worry (57%). “Government dysfunction” stole second (34%), and “the U.S. Presidential Election” ranked third (33%). These fears overshadowed other anxieties like “a potential recession,” “interest rates,” “market volatility,” and “geopolitical conflicts.”
“Gridlock, divergent visions, and persistent threats of government shutdowns have Americans concerned about our leaders’ ability to come together and solve large problems,” says Mitchell. “Increasingly, people are concerned that they and their finances may be caught in these arguments. It will be important for investors to avoid acting emotionally and maintain a long-term view.”
Additionally, upcoming elections could influence clients’ perspectives on saving, investment, and insurance strategies.
‘Offensive’ and ‘Defensive’ Financial Strategies
Amid current market and economic conditions, nearly half of U.S. adults (42%) say they’re “playing defense” with savings and investments or managing risks to protect assets. Around 29% are “playing offense” and capitalizing on opportunities to grow assets. About 29% of respondents remain unsure.
Many high-net-worth individuals — those possessing investable assets exceeding $1 million — move defensively. Two of five high-net-worth respondents cited intentions to transition investments into secure, high-yield options, like money market funds.
Offensive players increase stock market investments. Around 52% of Gen Z intends to allocate additional funds to stock market investments. About half of all high-net-worth respondents feel similarly. Generation Z and millennials are more inclined to supplement their income through side hustles — 46% and 43%, respectively.
One in six millennials — 16% of respondents — intend to seek guidance from a financial advisor. Additionally, 15% say they would bolster their finances by purchasing life insurance or enhancing existing coverage.
Other asset classes attract interest in addition to stock market investments. Approximately 21% of those surveyed expressed interest in expanding their investments in real estate and high-yield bonds.
Alternative assets such as hedge funds and private equity garnered interest from 19%. About 17% of respondents expressed interest in speculative investments like cryptocurrencies.
Just 9% of respondents anticipate increasing investments in precious metals.
Discipline in Decline
Research illustrates a decline among Americans who consider themselves “disciplined” financial planners, shrinking to 45% in 2024 from 65% recorded in the pre-pandemic 2020 study.
“During the most acute period of the pandemic, we saw a distinct rise in financial discipline, but in the ensuing years, there’s been drift,” says Mitchell. “My main concern is those with YOLO dreams colliding into a recession reality. At a time when people are feeling unstable about their financial futures, we’re encouraging our clients to prioritize planning and discipline like it was 2020 again.”
What Next?
Consumers stand on shaky ground in 2024. While some Americans express optimism toward the U.S. economy’s trajectory, those glass-half-full responses remain juxtaposed against surges in sentiments of instability and insecurity. These discrepancies influence consumers’ strategies, with some playing defense with their money and others offensively.
Regardless of optimism, American consumers must prioritize planning and discipline during economic uncertainty to navigate challenges and safeguard their family’s financial future.
