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Some economists and political pundits are getting frustrated. Really frustrated. That just can’t seem to understand that despite supposedly easing inflation and other claims that the economy is “good” why so many “average” Americans don’t feel that way.
The frustration of the elite chattering class is, in part, born out of refusal to recognize some important factors. First, the inflation that led to lost purchasing power in 2022 and 2023 did not to be created. Second, inflation isn’t declining today. It’s simply rising less rapidly than it was two years and that’s not saying much. Third, and perhaps most importantly, economics is a personal matter.
If a person’s personal economy isn’t where they want it to be, chances are they will perceive the broader economy as weak and those perceptions become their personal reality. At a time when costs remain elevated and credit conditions are tight, it’s hard to shake out of that line of thinking.
All of that is to say that it’s understandable that many Americans are dealing with high levels of financial stress today and that’s something advisors need to be aware of.
Financial Stress Belies ‘Good Economy’ Arguments
In terms of financial stress, unfortunately, the proof is in the pudding. CNBC’s International Your Money Financial Security Survey indicates 70% of the Americans polled are “very” or “somewhat” stressed about their personal finances.
Financial stress can be derived from a variety of scenarios and that much is confirmed by the survey, confirming advisors need solid game plans when helping clients alleviate such burdens.
“Top sources of that stress include several factors outside consumers’ control, including inflation (65%), economy-wide instability (35%) and high interest rates (27%). Others pointed to elements in their personal situation such as a lack of savings (44%), credit card debt (26%) or a layoff or loss of income (16%),” reports Kelli Grant for CNBC.
One place for advisors to start is to discuss with clients what makes them feel financially secure. As is the case with money stress, financial security can take on many forms. That’s actually a positive, not a negative.
“Among U.S. respondents in the CNBC survey, some of the most common components to feeling financially secure included having no outstanding debts (59%), accumulating ‘high levels’ of savings (47%) and owning their own home (45%),” according to the network.
Avenues for Reaching Financial Security
There are tangible ideas advisors can employ to help clients reach financial security. For example, 44% of those queried by CNBC said they’ll feel secure when their earnings outpace their spending, signaling that budgeting services, while not glamorous, could be appreciated among a broad swath of clients.
Additionally, 71% of those polled said they view passive income or well-funded retirement accounts as measures of financial security and those are two things advisors can certainly help with.
Two more points for advisors to consider. First, security isn’t viewed the same as wealth so it’s likely that many clients don’t need to be rich to feel secure. Second, many clients want more education on their road to financial security, indicating they want to be taught how to fish rather than being handed a basket of fish. That’s an encouraging sign, too.
Related: Higher Interest Rates Leading to Reduced Access to Credit