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
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,
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.
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