Are Americans Better Off Today Than They Were A Year Ago?

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While many areas of the economy continue to do well, many experts see tell-tale cracks in some economic markers of a coming recession. Others, understanding that downturns take place cyclically, warn of a coming recession.

Against this backdrop, Americans are maintaining a somewhat positive outlook on the state of their personal finances as we enter 2020 – albeit with some worrisome contradictory indicators.

Positive Outlook for 2020

On the hallmark question, “Are you better off today than a year ago?” 43% of Americans feel the same financially, 27% say they feel financially worse off, and 30% say they feel better off financially.

Meantime more than half (55%) of Americans say they are confident in their personal financial outlook in some key financial areas:

  • 63% say they have a plan to achieve long-term financial goals
  • 69% are confident in their ability to make major financial decisions.
  • 56% believe 2020 is a good year to buy a home.
  • 51% expect a tax refund from the federal government this year.
  • 49% said their 2019 household income was in line with expectations. Almost the same number (47%) expect their household income to be higher this year.

Optimism Among Millennials

More Millennials (39%) and Gen Zers (43%) say they feel better off financially compared to last year, versus the older Gen Xers (28%) and Baby Boomers (19%).

  • 61% of Millennials expect their household income in 2020 to be higher than last year.
  • 53% of Gen Z expects household income in 2020 to be higher than last year.
  • 48% of Gen X expects household income in 2020 to be higher than last year.
  • 30% of Baby Boomers expect household income in 2020 to be higher than last year.

This optimism among younger generations correlates with the fact that many are seeing a boost in their paychecks. Almost a third (32%) of Millennials reported that they had a pay raise at their current job in the past 12 months – the highest percentage among all generations.

  • 22% of Gen Z said they had a pay raise at their current job in the past 12 months.
  • 27% of Gen X said they had a pay raise at their current job in the past 12 months.
  • 12% of Baby Boomers said they had a pay raise at their current job in the past 12 months.

Worrisome Indicators

At the same time, nearly 7 in 10 respondents say that paying an unexpected $500 bill would be problematic.

Savings

Thirty-six percent have less than $500 in their checking and savings accounts (excluding retirement accounts).

Credit Card Debt and Everday Expenses

About a quarter (26%) of respondents are very confident they will pay off their credit card debt this year. Thirty percent are not at all confident that they will pay it off this year, but 48% are very confident that they will pay off all their credit card debt in time. 30% of survey respondents carried a balance for six or more months.

Comparing current levels of credit card debt to levels a year ago:

  • 29% reported they had the same amount of credit card debt as they did last year.
  • 23% reported more credit card debt.
  • 24% reported less credit card debt.
  • 24% reported that credit card debt does not apply to them.

Those surveyed put the following expenses on their credit card monthly, or more frequently.

  • Groceries (44%)
  • Dining out (39%)
  • Entertainment (32%)
  • Retail expenses (29%)
  • Vacations (26%)

Respondents who have carried a balance on their credit card say these expenses are the cause for carrying the balance:

  • Groceries (26%)
  • Retail expenses (20%)
  • Vacation (19%)

Rising Expenses

Rising costs many be a factor in carrying credit card debt. Americans said the following cost more than anticipated in 2019:

  • Food (48%)
  • Utilities (water, electricity) (39%)
  • Healthcare (37%)
  • Internet/TV (34%)

What Would You Give Up To Get Out Of Debt?

Overall Americans are carrying the following types of debt:

  • Credit card debt (47%)
  • Mortgage (29%)
  • Auto loan (27%)
  • Student loan debt (22%)

22% carry no debt at all. Almost a third (32%) of Americans making less than $25,000 per year say they have no debt; only 14% of those earning between $100,000 and $150,000 report not having debt.

Respondents are, however, anxious to get out of debt. Two-thirds (66%) say they have changed their spending habits to avoid debt, and many would be willing to give up the following to get out of debt.

  • Alcohol: 45%
  • Going out to dinner: 44%
  • Traveling: 35%
  • Coffee: 34%

Barriers to Home Buying

While 56% of Americans believe 2020 is a good year to buy a home, 54% believe home prices will increase, and 46% believe mortgage rates will increase, in the next 12 months.

When asked which of the following they consider as barriers to buying a home in 2020, they said:

  • Cost of the down payment: 41%
  • Cost of the monthly payment: 35%
  • Lack of overall savings: 34%
  • Credit score too low: 27%
  • Amount of debt they have: 26%

Tax Talk

More than half (51%) of Americans expect to get a tax refund from the federal government this year. Thirty-five percent expect their tax refund this year to be about the same as last year. If they do receive a refund, 37% plan on using it to pay off debt or add to savings.

Eighty-three percent of respondents said they did not change their W4 (tax withholdings) last year. Only 37% said the last time they looked at their paystub to review deductions and/or withholdings was their last paycheck.

Conclusion

Overall, Americans have a positive outlook on the state of their financial situation, and many indicate the desire and ability to improve their lives.

  • 78% say that they can take steps to improve their quality of life.
  • 71% of Americans say their personal relationships are strong and healthy.
  • 67% of Americans say they feel empowered to make changes to their lives.
  • 64 % of Americans say they are actively pursuing their goals.
  • 63% of Americans say they are free to do what they want.
  • 55% of Americans say they sleep well at night.
  • 50% of Americans say they can improve their housing situation.

Methodology: Freedom Financial Network commissioned Atomik Research to run an online survey of 2,005 individuals in the United States. The margin of error is +/- 2 percentage points with a confidence level of 95 percent. The fieldwork took place Jan. 10-13, 2020. Atomik Research is an independent creative market research agency. Download the raw data here.


Michael Micheletti serves as the Director of Corporate Communications at Freedom Financial Network where he is responsible for the strategic communications planning, knowledge dissemination and outreach to key consumer audiences. Before joining Freedom he held a variety of high profile communication and consumer education roles focusing on healthcare, tax and housing. He is a former reporter for FOX News, CNN and served as news director for Clear Channel Radio San Francisco.