An annual Northwestern Mutual survey finds financial discipline has gone down amid higher costs.

Feelings of financial insecurity among Americans have reached their highest point in at least a decade.

A third of American adults in Northwestern Mutual’s 2024 Planning & Progress survey said they don’t feel financially secure. That’s up from 27% in 2023 and the highest measure going back to 2012.

“Despite the growing economy, Americans have had to endure one financial disruption after another over the last several years, and it’s hard to feel positive when you don’t know what’s around the corner,” said Christian Mitchell, the company’s chief customer officer, in a press release.

One big culprit fueling financial anxiety is a familiar one — the high cost of living. More than half of respondents (54%) expect price pressures to increase this year, and only 9% said their household income was outpacing inflation. About a third think inflation will stay where it is, and fewer than one in five expect it to fall in 2024.

While the overall inflation rate has been decelerating, many Americans are not seeing that in their budgets. A rare bit of good news on that front came out on March 8, when Costco said in an earnings call that it was reducing prices on items including reading glasses, bottled water, batteries and frozen fruit.

People’s views on the broader economy were fairly grim in the survey as well, with more than half predicting a recession this year. But the 54% of respondents expecting that is down from the two-thirds who anticipated that in the 2023 survey.

After inflation, when respondents ranked what could impact their finances the most, just over a third of people cited government dysfunction, and a third the presidential election. A potential recession was cited by 24%, market volatility by 15% and geopolitical conflicts by 14%.

Those worries had more investors saying they are playing defense, not offense, with savings and investments — 42% versus 29%, respectively. But while a majority said they are focused on cutting costs and saving more, 59% said they’ll either spend the same amount or more this year on restaurants, vacations and entertainment. Just under four in 10 expect to spend less.

That makes sense, given a big fall in the percentage of respondents who consider themselves “disciplined financial planners.” The new survey found that just 45% of Americans would give themselves that label, down from 65% in 2020.

The generation most likely to say they’d engage in more discretionary spending this year was Gen Z, with some 36% of that generation expecting to increase spending, compared with 28% of millennials, 24% of Gen X-ers and 20% of boomers.

“My main concern is those with YOLO dreams colliding into a recession reality,” said Northwestern Mutual’s Mitchell. “At a time when people are feeling unstable about their financial futures, we’re encouraging our clients to prioritize planning and discipline like it was 2020 again.”

The study was conducted online by the Harris Poll between Jan. 3-17, among 4,588 US adults.

Written by: @Bloomberg

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