Spending exceeds income in the United States as negative trends in financial health emerge

financial health NetworkAmerica’s authority on financial health, with the support of the Citi Foundation and Principal(R) Foundation, unveiled the Financial Health Pulse: 2022 US Trends Report. This fifth edition of the report reveals that financial health in America has declined across many demographic and socioeconomic groups, with spending outpacing income and savings accounts depleted.

For the first time since its launch in 2018, the report recorded a drop in the number of people considered to be in good financial health, down three percentage points from last year to 31% in 2022. This change has erased most of the gains in financial health that people experienced in 2020 and 2021, returning financial health in the United States to near pre-pandemic levels. Nearly eight million people have moved from financially sound to coping, and two million more are now financially vulnerable. Notably, there was a six percentage point drop in the number of people reporting spending less than or equal to their income and a three percentage point drop in the number of people confident of achieving their long-term financial goals.

Key findings include:

• For the first time, the Pulse Trends report recorded a decline in financial health across most income groups, with those earning between $60,000 and $99,999 a year seeing a drop of seven percentage points, followed by a down four percentage points for those earning more than $100,000.
• Men (minus four percentage points) and women (minus three percentage points) experienced roughly equal declines in their financial health.
• Black people have seen a noticeable decline (minus six percentage points) in their financial health, falling to just 15% considered financially healthy in 2022.
• A three percentage point drop in the number of people reporting having enough emergency savings to cover at least three months of living expenses.

“The data shows that while the combined pinch of historic inflation and market fluctuations contributed to a rare decline in the financial health of high-income households, low-income individuals experienced
job-related improvements like pay raises or new jobs,” said Jennifer Tescher, President and CEO of Financial Health Network. “However, even with modest gains, low-income households are in a precarious position due to systemic financial barriers and wealth disparities. It is critical that employers, financial institutions and policymakers prioritize financial health and collaborate for better outcomes during these uncertain times, especially as economic conditions could trigger future declines in financial health.

FinHealth by demographics

Although this edition of the Pulse Trends report found a sharp decline in the financial health of traditionally secure groups like middle and high income earners, non-LGBTQIA+ and non-disabled people, significant and well-defined financial health gaps by gender, race and orientation persist (see full data table in report):

• Despite a sharp drop in financial health from a year ago, those earning between $60,000 and $99,999 are still much more likely to be in good financial health (36%) than those earning less than 30 $000 (10%) or between $30,000 and $59,999 (23%). hundred).
• Asian (44%) and white (35%) participants remain financially healthier than black (15%) or Latino (23%) individuals.
• Men (39%) continue to have higher levels of financial health than women (23%).
• Non-LGBTQIA+ people (32%) are in better financial health than LGBTQIA+ people (23%).
• People without disabilities (35%) still have higher levels of financial health than people with disabilities (20%).

Inflation and labor market indicators

Changing employment conditions and the perception of rising prices have had a significant impact on people’s financial lives. While people at all income levels said they were hit by inflation, people with low incomes reported the most stress from rising prices. Overall, high levels of stress about inflation were associated with a three-point drop in a person’s financial health score, with food, transportation, and utilities having at least a moderate impact on 30% or more of people’s standard of living.

At the same time, there was an association between labor market tightness and improved financial health scores for low-income workers, particularly those earning less than $30,000 a year who:

• Received a raise increased their financial health score by 7.9 points
• Increasing their hours worked saw an increase of 8.4 points – Voluntary job change increased their score by 9.1 points

Comparatively, the data showed no relationship between job changes and changes in financial health scores for high-income groups.

“The entire financial ecosystem has a role to play in improving the financial health of Americans,” said Jo Christine Miles, Director, Senior Foundation and Senior Community Relations. “Government interventions are crucial in mitigating the economic blows, while products and services from financial service providers that are better designed to help consumers manage their daily lives easily, securely and affordably are essential to strengthen the resilience needed to ensure stability during economic volatility,”

The Pulse Trends report rates survey respondents on eight indicators of financial health — spending, paying bills, short- and long-term savings, debt, credit score, insurance coverage and planning — to assess s are ‘financially sound’. “Coping financially” or “Financially vulnerable”. In 2020, the Financial Health Pulse also began using transactional data to gain an even deeper understanding of individuals’ financial health. By August 2022, 1,080 people had linked at least one financial account, totaling 6,628 accounts at 2,787 institutions.