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The 2020 Planning & Progress Study, an annual research study from Northwestern Mutual, explores U.S. adults’ attitudes and behaviors toward money, financial decision-making, and the broader issues impacting people’s long-term financial security.

Fragile Financials

Even before the COVID-19 outbreak led to a spike in unemployment and declines in the stock market and broader economy, 33% of Americans were already within three missed paychecks of having to either borrow money or skip bills.

These are the first set of findings from the 2020 Planning & Progress Study, an annual research project commissioned by Northwestern Mutual that explores Americans’ attitudes and behaviors toward money, financial decision-making, and broader issues impacting people’s long-term financial security.

From a financial perspective, the research shows people view cash and money market funds (45%) as their best defense against economic uncertainty and market volatility, with stocks, bonds and life insurance in a three-way tie for second (all at 18%). At the same time, nearly a third (31%) of people are unsure of what their best financial defense should be at a time of uncertainty and volatility.

 

Critical to plan

The research shows that 71% of Americans say their financial planning needs improvement.  That said, there are some encouraging signs in the data about people’s instincts to plan and the discipline they bring to it.

  • 22% consider themselves “highly disciplined” planners – They know their exact goals, have developed specific plans to meet them, and rarely deviate from those plans
  • 39% consider themselves “disciplined” planners – They know their exact goals, and have developed specific plans to meet them, but those plans can deviate at times because they don’t always stay on top of them
  • 29% consider themselves “informal” planners – They have a general sense of their goals and how to meet them, but they do not have a formal plan in place
  • 10% are not planners and have not established any goals

There’s also a sizable percentage who say they enjoy planning, and a plurality that see it as necessary even if it’s not their favorite thing to do. That said, 3 in 10 Americans struggle with confronting their financial situation, and given the economic downturn it’s reasonable to expect that number could go up. Specific numbers regarding how people feel about financial planning were as follows:

  • Excited and inspired. Love to do it! (29%)
  • Not my favorite thing in the world but know it needs to get done – like a medical check-up (37%)
  • Worried, nervous about confronting the financial details of my life (16%)
  • Prefer to not deal with it until I absolutely have no choice (6%)
  • Frustrated, annoyed with my financial situation (8%)
  • Skeptical about the value of planning (3%)

Benefits of getting professional help

The study shows that 29% of Americans work with an advisor and 65% do not.

Interestingly, when asked who people trust the most for financial advice, the #1 response was themselves (28%), followed by a financial advisor (24%) then a family member (13%). Meanwhile, 15% said they don’t get financial advice from anyone.

 

Read the news release

Download the 2020 Planning and Progress Study - Fragile Financials

Debt + Credit Cards

The latest findings from Northwestern Mutual’s 2020 Planning & Progress Study reveal that among Americans who carry debt, a third (33%) of their monthly income goes toward paying it off, exclusive of mortgages. Those with debt report having $26,621 on average, and 13% of Americans expect to be in debt the rest of their lives.

Among U.S. adults carrying debt, 58% say it has a substantial or moderate impact on their ability to achieve long term financial security. Additionally, many report that debt impacts their ability to reach major financial milestones:

  • 36% delayed significant purchases
  • 29% delayed saving for retirement
  • 18% delayed buying a home
  • 8% delayed having children
  • 7% delayed marriage

 

Signs of Progress…Before the Storm

There are some positive indications in the data that suggest Americans have been making progress in their ability to manage and reduce debt over the last several years. But it’s important to note that this year’s findings were collected just prior to the steepest impacts of the COVID-19 outbreak. Even so, it is worth noting the trend lines:

  • The total average debt among those who have it has been slowly declining over the years – from just over $38,000 in 2018 to $29,800 in 2019 to $26,621 this year
  • Of those with some debt, over two thirds (67%) have a specific plan to pay it off
  • Over a quarter (26%) of Americans report having no debt

 

The Credit Card Crunch

Credit card bills (22%) and mortgages (21%) are the leading sources of debt for Americans. Car loans (8%) and personal education loans (8%) came in as the next highest sources of debt.

Of the 42% Americans who report holding credit card debt, the average amount is $5,400. Of that debt, over half (52%) went toward paying for absolute necessities like rent, utilities and groceries; 36% was for discretionary expenses such as entertainment, vacations, or dining out; and 11% was used for educational expenses. The study also found:

  • 30% of U.S. adults either always or often pay the minimum payment on their credit card bills, just covering the interest without paying down any principal
  • 33% pay greater than a 15% interest rate on their cards, and 9% don’t know what interest rate they’re paying
  • 12% expect to be in credit card debt between 11 and 20 years, and 7% expect their credit card debt to last more than 20 years

There also appears to be a bit of a learning curve when it comes to credit card usage. More than six in ten Americans with credit card debt (61%) said that if given the choice, they would have changed the way they used credit cards in the past.

  • 56% would have limited their use of credit cards to primarily cover necessities
  • 37% would have gained a better understanding of interest rates
  • 23% would have waited to get a card until they really needed one

 

Read the news release

Download the 2020 Planning and Progress Study - Debt + Credit Cards