By Fran O’Rourke – KeyBank Capital Region Market President
Between rumors of a recession, interest rate hikes, inflation, and economic uncertainty, Americans are frequently faced with a choice to prioritize their financial freedom or preferred lifestyle. Americans’ mindsets are focused on their happiness and personal lives to help them feel fulfilled, while still anticipating they will face economic challenges that impact their saving and spending.
The KeyBank 2024 Financial Mobility Survey polled Americans about the state of their financial lives and attitudes and found that money isn’t buying happiness in America, but the share of Americans who are spending more and saving less has nearly doubled since 2021.
A resounding 66% of Americans would rather work a job they love with a lower paying salary than work a job they hate with a higher paying salary (34%). Additionally, in 2023, 25% of Americans said they’re spending more and saving less compared to 2022 (15%) and 2021 (13%). The spending is not toward dining out or vacations, but rather the everyday cost of living. In fact, 59% of Americans are cutting back on nonessential items due to the increasing cost of living in America. Other findings include:
A Shift in Lifestyle Priorities
Amid a tighter economic landscape and labor market, Americans continue to prioritize balance and well-being in their professional, personal, and financial lives. This year’s survey revealed that Americans are in favor of a soft-life culture that defines success based on happiness, contentment, and fulfillment vs. hustle culture, which defines success based on wealth, status, and achievement.
- Nearly 3 in 4 (72%) Americans would rather define success based on a soft-life culture focused on happiness, contentment, and fulfillment, with equal shares of males and females (37% each) agreeing that it promotes a healthier and happier lifestyle.
- More than half of Americans (54%) say a hustle culture that defines success based on wealth, status, and achievement can lead to burnout and negatively impact well-being. Nevertheless, one-third of males (33%) and one-quarter of females (26%) identify with hustle culture.
Cost of Living in America
The rising cost of living is becoming an increasing concern across the U.S., with Americans fighting off rising inflation and higher prices on goods and services. As a result, consumers from every generation are cutting back on spending and even dipping into their savings. With no sign of costs leveling out, Americans will need to learn how to balance an affordable lifestyle while maintaining basic, everyday needs.
- Increased Costs, Increased Stress. Nearly one-third (30%) of all Americans say they feel daily financial stress related to the cost of living in America. However, women (35%) are more likely than men (24%) to feel financial stress on a daily basis related to the cost of living in America.
- Every generation is feeling the strain of the cost of living. This begs the question, what will an affordable lifestyle look like in the next 5 years? More than three in four (77%) Americans across all generations believe the cost of living in America has gotten worse in the past five years.
Of those who recently purchased a home or are currently in the market, 40% said that inflation is the top purchasing influence. Of those people (20%) who are not currently in the market to purchase a home and haven’t purchased one in the past year, 69% believe the dream of owning a home is not very attainable.
At a time when home ownership feels unattainable to many, some younger Americans are choosing to make financial changes in order to achieve the dream, putting money aside, creating budgets, and reducing spending to buy a home and to feel more confident in their financial approach.
- As younger generations start to hit life milestones, it’s possible societal pressures are pushing their interest towards homebuying. The average age of Americans in the market for a home is 36, and to help with the dream of owning a home, they are spending less and saving more (45%).
- Financial Confidence: Almost three fourths (71%) of new homeowners within the last 12 months believe they could come up with $2,000 within a month if needed and are very/somewhat confident in the ability to grow their finances (86%).
- Homeownership also comes with an added expense, as half of new homeowners (51%) expect to use more of their savings next year as compared to those in the market for a home (45%) or who don’t own a house (35%).
Tips for Prioritizing Financial and Personal Wellness
Consumers looking to the year ahead may be wondering whether they can truly have it all. Here are some tips for maintaining healthy financial habits and building financial resiliency in the new year — without sacrificing personal and professional goals and ultimate happiness.
- Take an honest look at your 2023 financial habits to set a roadmap for 2024. The survey found that more Americans would rather share their recent Google search history (57%) than their monthly credit card statement (43%). If you’re similarly reluctant to review your financial decisions from the past year, now is as good a time as any to do so.
- Connect with a financial professional early and often. Faced with the rising cost of living, Americans may find it more challenging to pursue a desired lifestyle while meeting everyday financial needs. In addition to maintaining monthly budgets and day-to-day expenses, talk to your financial professional about staying on track with longer term goals, such as purchasing a home or planning for retirement. A Financial Wellness Review at your local KeyBank branch can help get you started.
- Meet with a mortgage loan officer to unlock the keys to homeownership. The homebuying process can seem intimidating, especially in a challenging economic environment. If purchasing a home is one of your goals in 2024, consult with your financial professional or mortgage loan officer to determine the programs and pathways to homeownership that make the most sense for your goals and your budget.
About the author: Fran O’Rourke is the President of KeyBank’s Capital Region Market. She may be reached at either 518-257-8733 or [email protected].
This is designed to provide general information only. All credit products are subject to collateral and/or credit approval, terms, conditions, availability, and subject to change. ©2024 KeyCorp.
How to Build an Emergency Fund
Building an emergency fund requires planning, disciplined saving, and consistent effort. Here’s a step-by-step guide to help you build your emergency fund:
- Step 1: Set a Savings Goal
Determine how much you want to save in your emergency fund, considering all your current expenses.
- Step 2: Create a Budget
Considering your monthly income and expenses, identify areas where you can cut back or adjust to save for your emergency fund.
- Step 3: Automate Savings
Set up an automatic transfer to a separate savings account dedicated to your emergency fund. Treating this transfer as a non-negotiable bill helps ensure consistent contributions. Learn more about setting up automatic savings with KeyBank’s EasyUp.
- Step 4: Start Small
If saving the full recommended amount seems overwhelming, start with smaller contributions. The key is to establish the habit of regular saving, even if it’s a modest amount at first.
- Step 5: Cut Unnecessary Expenses
Identify discretionary spending to reduce or eliminate it and redirect those funds to your emergency fund. Visit KeyBank’s 50/30/20 budgeting tips to determine your wants versus needs.
- Step 6: Use Extra Money Wisely
When you receive unexpected money such as tax refunds, work bonuses, or monetary gifts, consider allocating a portion or all of it to your emergency fund.
- Step 7: Side Hustles or Part-Time Work
Explore opportunities to earn extra income through part-time work, freelancing, or gig economy jobs. Direct the earnings from these activities toward your emergency fund.
- Step 8: Reduce Debt
Prioritize paying off high-interest debt while simultaneously saving for your emergency fund. Or even consider consolidating your debt into more manageable payments to help pay it down faster.
- Step 9: Avoid Temptation
Keep your emergency fund separate from your regular spending accounts. This reduces the temptation to dip into it for non-emergencies.
- Step 10: Stay Flexible
Life circumstances can change, and unexpected expenses may arise. If you need to use your emergency fund, replenish it as soon as possible.
- Step 11: Celebrate Milestones
Celebrate your progress as you reach milestones along the way. This positive reinforcement can motivate you to continue building your emergency fund. Learn more about staying financially responsible while treating yourself.
Remember, building an emergency fund takes time and patience. Start where you can, and gradually work toward your goal. The peace of mind and financial security provided by having an emergency fund are well worth the effort.