A Quarter of Americans Worry They’ll Go Broke This Year

Americans are getting a lot of mixed messages about the economy lately. Unemployment is at 3.7 percent — a 49 year low. Additionally, total household debt is $837 billion higher than the previous peak in 2008, and increased consumer spending is boosting the economy. Credit-card applications and involuntary account closures have increased over the last year. Average earnings have grown, but so has inflation.

Those entrenched in the world of economics seem to be growing increasingly anxious. Economists put the risk of a U.S. recession in the next two years at 40 percent. Chief financial officers are even more pessimistic with 82 percent predicting a recession by 2020.

Amidst all of this, we wanted to know how Americans are feeling about their individual financial future in 2019. Do Americans feel financially secure or are they worried about going broke?

Key Findings:

• 26% of Americans are worried about spending more than they earn this year
• Respondents 65+ were least concerned, followed by respondents 25–34
• Men and women are equally worried

It seems the growing pessimism about the economy isn’t having a huge effect on the average person’s outlook on their own finances. In fact, Americans may be overestimating their financial security. In 2018, nearly half of Americans spent more than or equal their income in 2018. This implies that 21 percent of our survey respondents are expecting their financial situation to improve over the next year.

1 in 4 Are Worried About Going Broke Over the Next Year

There is a fine line between pessimism and realism when it comes to personal finances. Many Americans are walking that tightrope. Though the tide may be changing, by most accounts 2018 was a good year economically for the U.S. So why do so many continue to struggle? The answer is undoubtedly complex. However, there are some potential pain points that stand out. Health care expenses have risen dramatically. Over 10 years, the average out-of-pocket healthcare cost increased by 53 percent. The cost of living seems to be getting more challenging. A Reuters poll found housing prices are expected to rise at twice the rate of pay and inflation. Renting isn’t much better. There’s also the aforementioned household debt hitting a record high.

Two age groups emerged as the least concerned about outspending their income, and they’re an unlikely pairing. Respondents over 65 were least concerned with only 17 percent reporting worries. At 22 percent, 25–34 year-olds were the second least worried age group. Baby Boomers and Millennials might make strange bedfellows to many when it comes to money. After all, the Fed just reported that Millennials are already broke. So why the relative lack of concern? Have they cracked the code to paying their bills and buying avocado toast? Perhaps coming of age during the recession made them more budget conscious while simulatenously making neccessary sacrifices. They also might be benefiting from the job surge. According to Pew, Millennial household income is actually higher than generations past. It may come down to confidence. A survey of adults between 25–44, found 83 percent feel confident about managing their overall finances.

Men and Women are Equally Worried About Outspending Their Income

In the battle of the sexes, men tend to come out on top when it comes to confidence around finances. Men have reported more confidence in loans, retirement planning and investing. According to studies, they also tend to be more financially literate than women. This may be changing though. A recent study found Millennial women were actually better at matching financial and insurance terms. Still, the men in the study were 20 percent more confident than women.

There may be many disparities in how men and women feel about finances, but in terms of the immediate future of their own money, we found they feel about the same. Women are less than a percent more likely to say they’re worried about going broke over the next year. When it comes to the big picture, however, men remain more confident. In the New York Times ongoing economic opinion study, men were much more likely feel good about the economy than women.

The future of the economy may be murky but there is plenty of positivity to be found in our survey. Three-fourths of Americans are not feeling worried about outspending their income in the coming year. In fact, they may be feeling downright optimistic. That same amount expects to be better off financially in 2019. There has also been an increase of people that are going to include finances in their new year’s resolutions. The new year can be a great time to make a plan to improve your financial health. One resolution that can help is improving your credit score. Putting some financial resolutions in place can keep you from going broke and help you weather any economic upheaval.

Sources:

Slate | Reuters | CFSI | Fidelity | The New York Times | The Washington Post

Methodology

This spending study was conducted for Lexington Law using Google Consumer Surveys. The sample consists of 1,000 respondents, with an average margin of error of 2.7 percent. This survey was conducted on November 27th, 2018.