Employees have beefed up financial habits, but 4 obstacles remain

A dichotomy in personal savings habits is occurring in America. On the one hand Americans say their financial habits are improved, are accounting for emergencies and have more confidence in themselves than the economy. However, financial discipline isn’t at the level it was last year and savings are dwindling.

That’s according to a new Northwestern Mutual 2022 Planning & Progress Study, which looks at attitudes and behaviors toward money, financial decision-making and broader issues impacting their long-term financial security.

The report shows that more than four in ten (43%) US adults say they made up for lost ground incurred financially during the first year of the pandemic, compared to 30% who say they haven’t and 27% who say they didn’t lose any ground in 2020.

Among the 43% who have made up lost ground:

• 10% say they made up all of it and more, and they are now ahead of where they expected to be financially
• 12% say they made it up entirely and are fully back on track financially
• 21% say they made up some of the ground lost in 2020 but are not fully back on track financially yet

Overall, a significant number of people report taking a more comprehensive and holistic approach to their financial planning – 44% say they have adjusted to account for bigger picture emergencies and risks.

For the most part, Americans report high levels of comfort in how they manage spending and saving. Those numbers grow even more for people who get professional help:

• 71% say they have good clarity on exactly how much they can afford to spend now versus how much they should be saving for later
• 82% of people who work with an advisor have good clarity on exactly how much they can afford to spend now versus how much they should be saving for later

Three quarters (73%) of US adults say they’ve adopted better financial habits as a result of the pandemic. Among them, an equal three quarters (73%) expect to maintain those habits going forward. While that number is relatively high, it’s below the 95% who said the same in 2021.

“COVID-19 is by no means behind us, but these findings suggest a meaningful number of people have turned a corner,” said Christian Mitchell, executive vice president & chief customer officer at Northwestern Mutual.

“This is an adaptation story – people have adjusted to the many ways the world has changed over the last two years and have emerged with some different financial priorities, habits and points of view. But progress doesn’t always follow a straight line – there’s been a little wobble in people’s behaviors compared to last year.”

The greatest obstacles to reaching financial security, according to the report, include inflation (41%), the economy (39%), lack of savings, (29%), personal debt (26%), and healthcare costs (22%).

“Some regression from last year isn’t particularly surprising given the heightened levels of uncertainty people felt earlier in the pandemic,” said Mitchell. “In order to see greater adoption of these healthy financial habits and behaviors moving forward, it’s important for people to put a financial roadmap in place to keep them on track – something an advisor can really help with.

But overall, people today feel relatively stable and clear-eyed about their financial footing, particularly in areas that they can control.”

The 2022 Planning & Progress Study was conducted by The Harris Poll on behalf of Northwestern Mutual and included 2,381 American adults aged 18 or older who participated in an online survey between February 8 – 17, 2022.