A new study by Northwestern Mutual found that many Americans are more confident about their personal finances this year. Specifically, 72 percent of surveyed U.S. adults said that they currently feel financially secure, and 38 percent anticipate that their general level of financial security will increase over the course of 2017. Contributing to such optimism is the belief among respondents that America itself is on a firmer financial footing. Indeed, 43 percent of surveyed adults said that they “somewhat or strongly” agree that the U.S. economy will be better off in 2017 than it was last year, a substantial improvement from 31 percent in the 2016 survey.
Two-thirds of Americans still anticipate that there will be another financial crisis at some point in the future but that is down considerably from the 76 percent of respondents who expressed such concerns in last year’s survey. Despite the broad improvements in sentiment, financial discipline still seems to be a challenge for many Americans, especially in relation to long-term planning and investing. Just half of respondents, for instance, said that they “somewhat or strongly” agree that they need a financial plan that “anticipates up and down cycles,” and only 43 percent of those that currently have a retirement plan said that it has been created to “endure the ups and downs in the market.”
Proper risk management appears to be an issue as well because just 43 percent of respondents said that they are willing to “give up the potential for higher highs to avoid the risk of lower lows,” and only 41 percent reported that their long-term strategy involves a mix of high and low risk investments. Although already disappointing, all of the above responses on financial discipline are actually worse now than they were in the 2016 survey. Rebekah Barsch, vice president of planning at Northwestern Mutual, added that “It is easy to have a short memory when it comes to financial discipline, but long-term risk management is not something to do in starts and stops. You need to plan for what can go right as well as what can go wrong, and it has to be consistent – throughout market and economic cycles, and over the course of a lifetime.”
One thing that can help with risk management, investing, and financial planning in general is regularly consulting with a professional advisor. This has been evidenced by various studies and fortunately, an earlier survey by Cerulli Associates found that more and more Americans, particularly young adults, are willing to pay for professional financial help. Specifically, 79 percent of respondents between the ages of 30 and 39 said that they would be open to paying for advice, and 73 percent of individuals under the age of 30 reported the same. Both of those figures are marked increases from earlier surveys and well above the level of eagerness to pay for financial expertise reported by older generations.
Sources: Northwestern Mutual, Cerulli AssociatesPost author: Charles Couch