Study – Low Savings, Debt Plague The American Psyche

Written by Richard Barrington

Financial Expert

Edited by Kristin Marino

Managing Editor

A new survey from MoneyRates shows that not saving enough and accumulating too much debt are the top money regrets among Americans today. Perhaps not surprisingly, the data also indicate that people who struggle with these issues may have a harder time pursuing a number of longer-term financial goals.

In total, the survey results suggest that people with shaky saving and spending habits are being forced to take a more short-term view of their finances, which is not conducive to effective financial planning.

America’s top financial anxieties

The study, which was conducted by Op4G, asked 2,000 American adults about their biggest financial worries, regrets, and fears. It also asked what they would most like to change about their financial behavior and how they would put a $10,000 windfall to use. This was the second consecutive year MoneyRates conducted this study. (The 2013 study is available here.)

Here are some of the major points to emerge from this year’s study:

1. People are often too worried about the present to plan for the future. The biggest financial worry identified by poll respondents was simply meeting essential expenses. Thirty-five percent of respondents identified this as their biggest concern. In contrast, the most forward-looking choice, funding savings goals, came in third with just 19 percent of the responses.
2. Regrets reflect this short-term orientation. People clearly regret the tendency to live too much for today. Forty percent say they regret not saving enough, and 22 percent say they regret accumulating too much debt. In contrast, just 12 percent regret not spending their money more freely. Perhaps reflecting a poll taken five years into a stock market recovery, just 8 percent cited poor investments as their biggest financial regret.
3. Americans could badly use a windfall. Suddenly finding yourself with an extra $10,000 at your disposal might seem like a form of financial fantasy, but a large group of respondents cannot even afford to dream about what fun they might have with that kind of windfall. When people were asked what they would do if they received $10,000 today, the most common response (41 percent) was that they would use it to pay down debt. In essence, these people have already spent a windfall they don’t have.
4. Many people recognize they are fighting a spending addiction. When asked what they would most like to change about their financial behavior, people most often chose “reduce my spending/increase my saving.” This choice garnered nearly 43 percent of the responses, which was more than twice as many as the second-place choice of making wiser investment decisions.
5. Never mind the next generation — Americans are afraid for themselves. The financial fear cited most often in the poll was not having enough money to retire comfortably. This garnered nearly 36 percent of responses, while two choices centered on taking care of the next generation — paying for a child’s college and leaving an inheritance — combined for just 13 percent.
6. Women worry more about necessities, men about comfort. The most common financial worry among women polled was having enough to meet essential expenses, but for men, the No. 1 worry was having enough to maintain a comfortable lifestyle.
7. Men want to change how they make decisions, women want to change their habits. Forty-four percent of men said they would either like to make wiser investment decisions or wiser purchasing decisions, while a combined total of just 26 percent of women picked either of these two choices for what they would most like to change about their behavior. In contrast, 49 percent of women said they would like to reduce spending and increase savings, compared with just 36 percent of men.

How debt changes things

When the poll responses are broken down between people who cite accumulating too much debt as their biggest regret and the rest of the survey’s respondents, it reveals some telling things about how being burdened with debt affects your financial outlook:

1. People with debt regrets worry most often about meeting essential expenses. This was the No. 1 worry cited by respondents with debt regrets. For the rest of the respondents, maintaining a comfortable lifestyle was the leading concern.
2. People bothered by debt regrets see little choice but to put a windfall into paying down debt. Sixty-four percent of this group said that is what they would do with a $10,000 windfall, while other respondents could afford to be more forward-looking — they most often said they would put a windfall into savings accounts or investments.
3. People with debt regrets are living closer to the edge. This group said their leading fear was being able to weather a financial emergency, while other respondents are most often concerned with funding a comfortable retirement.

It’s clear from these poll results that money regrets can darken the way you think about the past. The best way to avoid regrets like these is to approach financial decisions by considering how they will affect your future.