Americans are optimistic about the economy, but still clueless.
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If Americans were graded on their spending and saving habits, they’d get a big fat F.
That’s what happened in a financial confidence test from SunTrust: We scored 57.8 out of 100. Why? We’re not budgeting, saving, managing debt, advancing our careers or planning for retirement enough. And a tough economy is no longer a valid excuse.
“Just because the economy is doing better doesn’t mean that people’s behaviors are going to change,” says SunTrust marketing executive Keith Lerner. “But despite all these good trends, many Americans still have ‘low to moderate’ financial confidence.”
Where are Americans slipping up?
High financial confidence starts at 75 percent, Lerner told Debt.com. He says there are three factors specifically telling him that Americans lack financial confidence.
- Emergency savings: 49 percent of Americans have less than $2,000 tucked away
- Pay off credit cards each month: Only 60 percent of Americans do
- Living paycheck to paycheck: Two-thirds of Americans stretch their money this way
Lerner hopes that SunTrust’s new test can help gauge where Americans’ financial confidence is, then build it.
“We’re really trying to look at where’s our starting point today. Which is saying how can we do better as a nation?” Lerner asks. “And our hope is that by getting that national conversation going that we’ll continue to see some improvement.”
So, what should Americans do to improve their finances?
Now’s the time to break bad habits
Right now is a great time for Americans to change their financial habits, Lerner says. Because the economy is in a better place than it was during the Great Recession, more Americans should be putting in effort to prepare for the next financial downturn, so they’re not caught off guard. But that’s not what we’re doing.
In fact, if faced with economic downturn in the near future, the confidence index will probably take a downturn with it, according to Lerner.
“Behaviors don’t change overnight. It takes time,” Lerner says. “And just because the economy is better, doesn’t mean that people have changed and said, ‘hey this is the time that I should be trying to start saving more and putting more away for retirement for when the downturn comes, I’m prepared.'”
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Boosting financial confidence
Just starting small is a positive step toward changing our poor financial habits, Lerner says.
Maximizing our income, whether by working toward a promotion, or picking up a second job will enable us to save more. And attaining a college education will lead Americans to earn more. Someone with a college degree earns double over their lifetime what someone with a high school diploma earns, Lerner says.
“Key priorities are having a budget and controlling spending,” Lerner says. “Keeping spending in line with one’s income is one of the most successful strategies reported by consumers. Even though sometimes it’s difficult to keep track, try a month, try it for two months. By doing that, pretty much everyone that we talk to is surprised by where they can potentially save some money. The same thing with emergency savings.”
Lerner concludes: “Forming stronger habits on money, we’ve found leads to happier lives, lower financial stress, and increased financial confidence.”
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Article last modified on June 29, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Business Is Good, But Our Financial Habits Aren’t - AMP.