Signs of recovery on Wall Street suggest this economic hurricane has almost passed Main Street, but recent research from a financial education firm, Financial Finesse based in California, suggests Main Street isn’t exactly buying it.
The report provides primary data on consumer financial issues by tracking calls into the firm’s financial helpline as well as online use of its financial planning program. The study shows that counter to recent signs of recovery on Wall Street, economic conditions are actually worsening for many Americans.
“Above all right now, American consumers are financially stressed,” says Liz Davidson, founder and CEO of Financial Finesse. “We’re seeing employees’ financial stress reaching serious levels."
An overwhelming 98 percent of employees who used the online financial planning in the second quarter of this year reported they are stressed about their finances, 35 percent indicating their stress level is either high or overwhelming.
Financial Finesse works with large organizations to provide unbiased financial education to their employees as an employee benefit. The company has been conducting research on consumer financial issues for the past 10 years. Recently, Davidson says they can’t help but notice that Americans’ financial wellness is worsening.
In Q2 alone, a record 82 percent of calls made to the helpline were about short-term financial issues—mostly debt and money management problems-- and only 18 percent of calls were focused on long-term 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 the calls Financial Finesse is receiving about long-term financial goals, such as retirement planning, are more disconcerting than in the past. From Q1 to Q2 2009, calls about taking retirement plan loans and hardship withdrawals nearly doubled, increasing from 9 percent of total calls in the first quarter to 16 percent in the second quarter.
“People are focused on how to get through their day-to-day expenses right now, not how to plan for retirement,” Davidson says, adding that worsening economic conditions are making Americans more skeptical to news that this economy is recovering, despite a 15.9 percent increase in the S&P 500 during the 2nd quarter.
The company has seen an all-time low in investing calls this quarter and that's a sign that consumers aren’t ready to shift their focus back to the future just yet. Only 3 percent of total calls to Financial Finesse's helpline dealt with investing, a 6 percent drop from Q1 2009.
She says. “Consumer confidence is still low; they aren’t really buying that the worst of this recession is behind us.”
But the positive side of today's situation has helped consumers garner a new level of fiscal 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.”
Financial Finesse is seeing an all-time high in employees’ participation in its behavioral change program, which tracks changes employees make to their finances following one of the company’s financial workshops. Fully 93 percent of employees who participated in the program in the second quarter of 2009 reported making at least one major change to how they manage their money within 30 days of the workshop. Even more notable: 7 of the top 10 changes employees are making require significant financial sacrifice, says Davidson, and employees are showing signs they are willing to make those sacrifices, even if it means downscaling their lifestyles.
“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”.
Financial Finesse is a provider of financial education to businesses nationwide. They deliver financial education on any financial topic in a variety of formats, such as workshops, a financial helpline, an online financial learning center, webcasts and more. Financial Finesse was founded in 1999 with a single mission to help people everywhere become financially secure and independent. For more information visit www.financialfinesse.com.
