Financial Wellness

The state of financial wellness — Part 1

Rising costs, overwhelming debt, and nowhere to turn: The vast majority of Americans can no longer afford a good life.
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This is the first post in a series that explores the extent of financial stress among Americans, how that stress affects businesses, and what the path forward looks like.

At Even, we build products to help everyday Americans grow financial wellness and make progress in their lives. To help us get there, we spend a lot of time talking to people who are struggling financially. Take Bryan, for example: He’s a 32-year-old general manager at Walmart, but he has a master’s degree in chemical engineering. He’s drowning in student debt, and his family of three lives paycheck to paycheck.

Sometimes he gets down on himself, wishing he could be working in the field he’s passionate about (and educated in). But then he’s forced to snap back to reality and deal with the fact that the debit card was declined at the grocery store, or there might not be enough gas in the car to get to work. Despite his best efforts, Bryan can’t seem to get ahead.

Stories like Bryan’s are disturbingly common. The majority of Americans are living paycheck to paycheck, struggling to make ends meet, and enduring profound amounts of financial stress. And when people leave their houses to go to work, that stress comes right along with them. It affects their mindset, their performance, and ultimately, their desire to stay and grow at their employer. So how did we get here? And what can be done about it?

This is what we’re up against

Costs are rising, and debt is through the roof. Since 1980, medical expenses have gone up by a factor of five, while housing has gone up by 200%, and college tuition has doubled — all while income is stagnating. “Working your way through college” is no longer realistic, which means Americans are holding $1.4 trillion in student debt, and 3.9 million of debt holders never finished with their degrees. The average household has $8,284 in credit card debt; total consumer debt has been increasing for 17 consecutive quarters. Mortgage debt is at $9.1 trillion.

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Financial wiggle room is the key to building a better life. The financial industry knows this, so they’re standing by to “help” consumers with services that provide relief from debt and liquidity shortages. But instead of helping people make progress, credit card companies, banks, and payday lenders are just digging deeper holes for Americans to fall into — and pocketing billions of dollars per year along the way.

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The proof is in the numbers: In 2017 alone, Americans paid over $34 billion in overdraft fees. As of 2018, the payday loan industry is worth $9 billion thanks to the fact that the average consumer pays $1,105 to borrow just $325.

Read more: Everyone deserves their shot at the American Dream — But too few of us have the financial freedom to truly achieve it.

Starving for savings

As Americans navigate all these obstacles — declining income, soaring expenses, profit-hungry financial institutions — there’s just nothing left over for savings accounts. In the 1980s, the savings rate for the bottom 90% of earners was over 10%. After 2011, that dropped to about 2%. A 2018 study found that 58% of Americans had less than $1,000 in savings; 32% had nothing saved at all. And while it might be easy to dismiss these numbers as evidence of poor discipline or frivolous spending, research shows that this simply isn’t the case.

The U.S. Financial Diaries’ Savings Horizons research shows that people are saving money — but it gets wiped out over and over again by income fluctuations and unforeseen expenses. Savings account balances don’t reflect how hard Americans are trying to save, because those savings accounts look more like checking accounts: They’re used frequently, with multiple deposits and withdrawals per month.

Read more: The 401(k) loan epidemic—Why millions of Americans are borrowing from their futures just to make ends meet.

One example of this is the number of employees who aren’t saving for retirement because they’re struggling to pay bills that are due now. PwC found that 27% of employees have withdrawn from their retirement accounts to pay for unforeseen expenses or medical bills. Another study found that 18% of workers have cut back on their 401(k) contributions, and 38% don’t participate in at all. As Angie Chen from the Center for Retirement Research asks, “If people can’t cover a very small, unexpected expense, how can we expect them to save for retirement?”

The answer of course, is that we can’t.

Up next

Money is the top cause of stress in our country. In our next post, we’ll explore the different types of stress Americans are dealing with, and how it’s affecting businesses across the country.

Want to learn more? Download our newest e-book: A Guide to Financial Wellness: The Employer’s Handbook for Understanding On-Demand Pay and Financial Wellness Benefits.