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Americans are pretty stressed out about money — and that likely isn’t going to change anytime soon. Nearly two-thirds (63%) of people do not expect their finances to improve in 2024, according to a recent Bankrate survey.
This pessimism is fueled mainly by high inflation, stagnant wages, and dissatisfaction with economic policies. Let’s take a closer look at why Americans are feeling so gloomy.
The lingering burden of high inflation
One in four Americans think their finances will get worse in 2024, and 38% expect their financial situation to remain the same. Almost two in five (37%) expect their situation to get better.
Why do Americans feel like their finances won’t get better in 2024? Most point to inflation.
A staggering 61% of those expecting their finances to get worse or stay the same said ongoing high inflation is the main reason they don’t anticipate their finances improving.
This finding highlights the massive burden rising prices have placed on households over the past few years. Inflation peaked at 9.1% in June 2022 and remained at 3.4% as of December 2023, well above the Federal Reserve’s 2% target.
Prices have increased on everything from gas to groceries, depleting many Americans’ savings and straining their bank accounts.
In some ways, the American economy is relatively resilient. The job market remains strong, and wage growth continues to outpace inflation, giving consumers more purchasing power.
But economic indicators don’t always align with how Americans feel about their money. This explains why 32% of respondents who believed their financial situation would stay the same or worsen pointed to stagnant or reduced income as the culprit.
Frustration with government policies is also driving pessimism. Almost one-third (31%) pointed to work done by elected officials as the reason their finances would stay the same or worsen.
Other reasons included:
- Changing interest rates (22%)
- Personal debt (19%)
- The amount of money made from savings or investments (16%)
- Changes in life circumstances, such as family or health (16%)
Generational divide: Baby boomers are more pessimistic than younger generations
While overall sentiment is glum, the Bankrate survey revealed a noteworthy divide between older and younger generations regarding financial hopes for 2024.
Baby boomers, or those aged 59 to 77, were the most pessimistic. Almost 40% of baby boomers believed their financial situation would worsen in 2024, while only 20% expected improvement.
Younger Americans are far more optimistic:
- Only 11% of Gen Z, ages 18 to 26, think their finances will worsen in 2024. Almost 60% believe their finances will get better.
- Around 1 in 5 (17%) of Millennials, those aged 27 to 42, think their finances will get worse in 2024, and 49% think their finances will get better.
- Around 3 in 10 Gen Xers (28%), ages 43 to 58, think their financial situation will worsen in 2024. More than 1 in 3 (33%) think their finances will get better.
This disparity highlights how different life stages and closer proximity to retirement impact financial outlooks. Younger adults often have more time to focus on savings and reducing debt. Plus, they may have fewer long-term financial obligations.
On the other hand, older generations may be wary about inflation’s damage to savings and retirement incomes. Inflation could also have more of an impact on retired Americans living on a fixed income.
Home prices have also fallen somewhat from their peak in 2022, and mortgage rates are expected to slowly decline this year. This may give younger Americans hope that they can achieve homeownership. Older Americans with more home equity may worry about falling prices and the impact that decreased home equity may have on their financial situation.
What you can do right now
Almost 90% of Americans have at least one financial goal this year. The most common goals are paying down debt (22%), getting a higher-paying job or another source of income (16%), and saving more money for emergencies (15%).
The overarching theme of 2024 seems to be cautiously conservative when preparing your finances. With inflation expected to be far above the Federal Reserve’s 2% target, most Americans seem to be buckling down for an extended period of high prices and economic uncertainty.
While you can’t control the economy, there are things you can do right now to improve your future situation.
The most important thing is to save more money now, especially if you’re one of the 22% of Americans with no emergency savings.
You can protect yourself from financial uncertainty by reducing your spending and saving more. Consider using a high-yield savings account, which offers higher interest rates and easy accessibility.
Paying down debt, especially high-interest debt, is also important. If you have credit card debt, paying it off will save you money on interest charges.
Creating a financial plan can help achieve these goals. Start with how much money you make each month, then build a monthly budget to help you track and limit your spending. Be sure to include savings and debt payments in that budget.
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