“Above all right now, American workers are financially stressed,” says Liz Davidson, founder and CEO of Financial Finesse, a financial education provider. “We’re seeing employees’ financial stress reaching serious levels that we need to be concerned about.”
A new report by the firm indicates that recent signs of recovery on Wall Street haven't reduced the financial fears of American workers. An overwhelming 98 percent of employees who used the company’s online financial planning platform in the second quarter of 2009 reported they are stressed about their finances, with 35 percent indicating their stress level is either high or overwhelming.
In Q2 of 2009, a record 82 percent of calls made to the firm's helpline were about short term financial issues—mostly serious debt and money management problems—and only 18 percent of calls were focused on longer-term financial planning.
“It’s alarming,” says Davidson. “Just a couple years ago we saw an almost even flow of calls about short-term and long-term financial issues. This year, the gap is huge.”
And even the calls that the firm is getting regarding long-term financial goals, such as retirement planning, are more disconcerting than in the past. From Q1 to Q2 of 2009, calls about taking retirement plan loans and hardship withdrawals nearly doubled, increasing from 9 percent of total calls in Q1 to 16 percent in Q2.
“People are focused on how to get through their day-to-day expenses right now, not how to plan for retirement,” Davidson says.
Worsening economic conditions Americans are feeling at home are making them skeptical to news that the economy is recovering, despite a 15.9 percent increase in the S&P 500 during Q2 of 2009, says Davidson.
Lower Focus on Investing for Retirement
The company saw an all-time low in investing calls that quarter, a sign that consumers aren’t ready to shift their focus back to long-term again, she says. Only 3 percent of total calls to their helpline dealt with investing, a 6 percent drop from Q1 of 2009.
“Americans are hesitant to jump back into the market,” Davidson says. “Consumer confidence is still low; they aren’t really buying that the worst of this recession is behind us.”
More Prudent Habits
The positive side of consumers’ skepticism toward recovery, she says, is that it has brought Americans into a new era of financial responsibility. “They never want to be in this kind of economy again,” she says. “People are feeling empowered to take control of their finances. They may not be able to control the market, but they can control how much they are putting away and how much they are spending.”
The firm is seeing an all-time high in employees’ participation in its behavioral change program, and employees are showing signs they are willing to make sacrifices to put themselves on a steadier financial footing, "even if it means downscaling their lifestyles," Davidson says.
“There’s a renewed commitment to change how we manage our money,” says Davidson. “If this commitment is sustainable, and we believe it is, consumers will be less likely to become over-leveraged with debt, overspend, or make emotional decisions about investments. These changes will benefit all Americans, and future generations”.
Stephen Miller is an online editor/manager for SHRM.
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401(k) Education Strategies for Any Economy, SHRM Online Benefits Discipline, May 2009
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