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A recent MarketWatch survey found that nearly half of Americans (48.6%) consider themselves bankrupt.
This sobering statistic reflects a harsh reality: Americans are becoming increasingly financially anxious, even as key economic and market indicators show signs of strength. While Wall Street continues to enjoy another bull market this year, financial worries persist on Main Street.
Even highly paid workers are reporting financial hardship, with one-third of six-figure earners worried about bills, according to the Federal Reserve’s latest Survey of Living Standards. The situation resembles a Dickensian economy, oscillating between “best of times” data and “worst of times” sentiment.
You’re not alone if you’re worried about money. But what does it actually mean to be broke? Traditionally, being broke means not being able to pay bills or cover other necessities.
But in a MarketWatch survey asking 2,000 Americans about their finances, 92% of those who said they were broke said they ran out of money before payday. While spending all of your money on living expenses is stressful, it doesn’t make you completely bankrupt. Still, the widespread feeling among Americans that they’re broke, or at least cash-poor, is worrying.
What do the experts make of this negative trend? Financial experts share tips for coaching their clients to stay financially resilient amid increasing economic pressures.
Dollars and Sense
To get out of the “salary hamster wheel” you need to gain some perspective.
Kristin Luken, financial dignity coach and founder of 7 Pillars, LLC, says people need to understand where their money is going.
“Everyone thinks they know, but unless they’re tracking their spending, it’s just a guess,” says Luken. “I’ve set up my clients with personal finance apps that consolidate their spending in one place, and they’re often surprised at how much money they’re spending on things that aren’t even that important to them!”
“This realization can be an uncomfortable one,” warns Ariel Tucker, founder of Connected Financial Planning. “Clients are forced to confront the fact that they are overspending.”
“My role then shifts to advocating for their future… It’s important to recognise what they can truly afford now and what they should defer to protect their long-term financial situation.”
Saving more, rather than just spending what you have, is the first step to building financial security and living a future that isn’t limited by your paycheck. Consider using a financial tracking app or spreadsheet to monitor your household income and expenses.
Debt insolvency
Before you can start saving, most people first need to get out of debt.
Most Americans have some kind of debt that they need to pay off, whether it’s a credit card bill, a personal loan, a mortgage, etc. And not all debt is the same, which is why it’s important to prioritize.
“Pay off your credit card debt first,” argues Josh Rudman, owner of Presidio Advisors. “Interest rates on credit cards are often over 30%!”
“Paying off your credit card bills in full automatically gives you investment returns of over 30% — far higher than you’d get from investing in the stock market. Plus, paying off your bills in full each month helps prevent your debt from getting out of control and gives you peace of mind.”
Once you have paid off your credit card debt, downgrade and freeze any cards that charge annual fees.
Debts, such as mortgages, can increase net worth over time. But consumers need to manage these debts properly or risk becoming cash-poor and asset-rich. This can also exacerbate financial stress and feelings of “bankruptcy.”
Enjoy the drive
Taking risks and cutting corners won’t work in the end. Financial discipline typically requires sacrifice and hard work, but most Americans aren’t endowed with the frugal spirit of self-denial and simple integrity. It’s important to include some fun in your financial plan so that your clients don’t give up on their goals and turn to hedonistic spending, gambling, or other self-destructive patterns.
“We design plans to build up an emergency fund, but we don’t stop there,” says Raman Singh, founder of Singh Private Wealth Management. “We also create a ‘slush fund’ account – money set aside for fun and personal enjoyment. This approach addresses our clients’ immediate financial concerns, making the journey more rewarding and less stressful.”
“It’s important to balance the hard work of financial planning with fun moments so that clients stay motivated and positive throughout the process,” Singh continues. “Our goal is to make the path to financial stability as enjoyable and encouraging as possible.”
Feeling financially “broken” is a growing concern in the United States. Money anxiety is widespread and becoming the norm for many. However, practical steps can be taken to improve consumers’ financial well-being.
Americans can regain their financial confidence by clarifying their spending habits, reducing debt, and saving strategically. Working with a financial advisor can provide valuable advice and support to help you create a customized plan that addresses your immediate needs and long-term goals.
This article was produced by Media Decision and distributed by Wealth of Geeks.
