June 04, 2017

Money packs a tremendous physiological wallop. In general, the better our personal finances, the healthier we are, emotionally and physically. But when personal finances are out of balance, it can affect our productivity, relationships, and personal well-being. And, right now a lot of American households – even those with high incomes – are out of balance. And stressed.

Consider these numbers provided by consulting firm PwC in their 2016 Employee Financial Wellness Survey, released in early 2017, regarding employees earning $100,000 or more:

  • 20% find it difficult to meet household expenses on time each month.
  • 43% consistently carry balances on their credit cards (as compared to 32% last year).
  • 27% find it difficult to make their minimum credit card payments on time each month.
  • 22% use credit cards to pay for monthly necessities they can’t afford otherwise.

Remember, these numbers aren’t for low-income households. A sizable percentage of those with upper-middle class incomes are under financial pressure. What is the source of this pressure?

If you dig deeper into the PwC report, a big stressor is debt. Particularly, debt that was acquired at the beginning of their financial lives: student loans.

The Burden of Student Loan Debt

PwC asked respondents with student loan debt about the impact it had on their ability to meet their other financial goals. For Baby Boomers and Millennials, four out of five said student loans had either a “significant” or “moderate” impact. (The percentage for Gen-Xers was a little lower, but still two out of three.) For those who said student loans affected their lives, the ripple effect was both financial and physiological:

  • 65% found it difficult to meet household expenses on time each month, and 41% were using credit cards to pay for monthly necessities.
  • 72% were carrying credit card balances, with 55% struggling to make minimum credit card payments.
  • 81% reported being stressed about finances, and 32% said financial worries affected their productivity at work.

The report’s summary statement: Employees impacted by student loans are in worse financial shape than other employees.

To which you might say, “Well, duh.” But is this awareness going to change American’s borrowing behaviors? Actually, it may be happening.

A Hidden Blessing from the Last Recession?

In some ways, the stress-inducing debt that American households carry today is a result of several generations of prosperity. While those who grew up in the Great Depression of the 1930s were reluctant borrowers, successive generations have become accustomed to borrowing; debt service has always been a budget fixture. But just like those who came of age during the Depression were cautious about debt, a similar reaction may be percolating among Millennials.

Citing studies by two University of California-Berkeley economists, an April 1, 2017Wall Street Journal article said households that “have lived through a high-unemployment environment spend significantly less over their lifetimes than those that haven’t.” This behavioral change was particularly strong for people who were young when unemployment was high. In the same vein, the WSJ noted that even though unemployment is down and personal incomes are beginning to rise, inflation-adjusted spending declined. But saving is up.

You May Be Able to Carry Debt, but It Weighs on You

For many American households, their first and most significant wealth management action should be getting their debt under control, then systematically paying it off. As the study shows, the benefits are more than financial. If this is your situation, be proactive about seeking assistance from a financial professional. 

This newsletter is prepared by an independent third party for distribution by your Representative(s). Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice. Links to other sites are for your convenience in locating related information and services. The Representative(s) does not maintain these other sites and has no control over the organizations that maintain the sites or the information, products or services these organizations provide. The Representative(s) expressly disclaims any responsibility for the content, the accuracy of the information or the quality of products or services provided by the organizations that maintain these sites. The Representative(s) does not recommend or endorse these organizations or their products or services in any way. We have not reviewed or approved the above-referenced publications nor recommend or endorse them in any way.

Lifetime Financial Growth, LLC is an Agency of The Guardian Life Insurance Company of America® (Guardian), New York, NY. Securities products and advisory services offered through Park Avenue Securities LLC (PAS), member FINRA, SIPC. PAS is an indirect, wholly-owned subsidiary of Guardian. Lifetime Financial Growth is not an affiliate or subsidiary of PAS or Guardian. © Copyright 2017   2017-39362   Exp. 4/2019