A third of Americans are sorely mistaken about their financial situations.
Many are under the impression they’re either better or worse off than they actually are, according to new research.
These inaccurate perceptions are unfortunately proving powerful, too. Some people are unjustifiably worried they’ll never be able to retire, while others incorrectly assume they are on the path toward financial success and should stay the course.
In an in-depth survey of adults nationwide, Prudential Financial set out to compare Americans’ “objective financial health (such as what they earn, own and owe) and their subjective financial health (including their financial outlook and how optimistic or pessimistic they are about achieving financial goals).”
Notable findings of its Financial Wellness Census include:
- Around half of Americans are “financially healthy,” and the other half is struggling to cover current living expenses and save for the future.
- Among those who are doing objectively well, more than a quarter are nonetheless pessimistic about their financial situation and worried about their financial future.
- Among those who are doing objectively poorly, almost a third are optimistic about money and confident in their ability to achieve future financial goals.
- Women are typically more pessimistic about their financial future than men, regardless of their current financial state.
- Unsurprisingly, whether financially healthy or not, those who have more assets and less debt tend to be more optimistic about future finances than their counterparts.
- Working with a financial advisor also correlates with having a positive outlook.
It should go without saying, countless money issues could arise from having false confidence or unfounded fear over finances, and Prudential’s report goes on to detail a few:
“Americans in poor financial health who are nonetheless hopeful about the future may have good reason for their optimism—perhaps they are completing schooling or training that will
soon boost their income. But it also could blind them to the need to revamp how they’re spending and saving their money.
“Individuals in good financial health, but pessimistic about their financial situation, may benefit from an excess of caution—they may be less likely to spend money frivolously today and miss it tomorrow. But they also could be subjecting themselves to unwarranted stress, and depriving themselves and their families of rewarding comforts and life experiences.”
It’s not all bad though. Census findings revealed that, at the very least, Americans are mostly level-headed when it comes to financial priorities (regardless of their financial state). Three-quarters of respondents agreed that putting away enough money to last throughout retirement was a top financial goal, closely followed by saving for future healthcare needs (73 percent) and keeping up with current expenses (72 percent).
“Our relationship with money can affect our physical health, stress levels and state of mind, family dynamics and even our performance at work,” Stephen Pelletier, executive vice president and chief operating officer of Prudential’s U.S.-based businesses, said in a statement.
“That’s why it’s so important to us as a company to hear from Americans across the country about the financial challenges and opportunities they face. Only by listening can we truly learn what people need to help them get on the path to financial wellness and stay on the right track throughout their lives.”