The 2023 Personal Finance Perspectives Survey by FNBO (First National Bank of Omaha) is out — and its results can help us assess our own finances and plan for the coming year. While the sample size on this one isn’t huge, the survey was conducted nationwide and weighted to account for age and gender distribution. What’s more, it was pretty in-depth, covering mental health issues related to finance, as well as hard stats about things like savings, debt, and passive income.
So, what exactly were the results? And what can we take from them if we’re aiming for a financially healthy 2024?
The Paycheck-to-Paycheck Problem
According to the survey, 57% of Americans say they’re living paycheck to paycheck. This isn’t always a low-income problem but (often) a lifestyle inflation problem. People on high incomes are sometimes living this way, although their life will look very different from someone with the same issue on a much lower income.
For those who earn decent money but still struggle to make it from one month to another, the root of the problem can be a culture that encourages us to live in a way that I think of as “exactly at our means”. Living beyond your means is discouraged by society, but living well within your means is too, in many ways.
We’re expected to stretch ourselves and live the best life we can, given our income. This is never more apparent than when it comes to housing, where it’s generally assumed that everyone is living in the best possible accommodation they can afford. It’s not uncommon to hear someone criticized for living in a cheap area or “still living with roommates”. The speculation is invariably, “I’m sure they can afford better than that.”
The problem here is that constantly stretching yourself to obtain the very best that you can afford leaves you with very little leeway, financially speaking, and in fact, makes it impossible to live well within your means.
The solutions are fairly simple (for those on a decent income). The most obvious is a pay-yourself-first strategy, where a significant chunk of income is paid straight to your own savings and/or investments. You’ll still be tempted to buy the best you can afford. It’s just that the best you can afford is now defined by the amount of money you have left after a set amount has gone straight to your savings and investment accounts.
Debt and Its Impact
As is often discussed in personal finance, there is good debt and bad debt, and most people carry some personal debt throughout their life, in the form of student loans, a mortgage, a car loan or consumer debt. The interesting statistic in this survey is that 44% of Americans with debt say it hinders progress towards achieving personal goals.
For those of us working towards better financial health over the next 12 months, that’s the type of debt to address. We all want to be able to set meaningful personal and financial goals, and achieve them. If you’re one of the 44%, it’s time to get control of your debt, and no, that doesn’t necessarily mean paying it off. But it does generally mean having a solid plan in place to consistently reduce it.
The first step, as with so much in the area of personal finance, is to know where you are right now. Work out how much you owe, to whom, and at what interest rate. Then, make a plan to pay that debt down. Consider whether you need to use the Snowball Method or the Avalanche Method, and consider talking to a credit counselor about things such as debt consolidation, perhaps through consumer credit “hacks” such as using 0% balance transfers.
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Passive Income
57% of those surveyed said they have at least one source of passive income. This could be a passive investment, a rental property, a pension, or digital assets. Passive income sounds attractive, and generally is, but it’s important to remember that a fixed pension that’s barely enough to live on is passive income, and so is a seven-figure property portfolio.
If you’re currently one of the 43% who don’t have any passive income whatsoever, then that might be a goal you want to add to your list for the coming year.
You could start small with a modest amount invested into dividend stocks, index funds or ETFs, or start researching building your own “digital real estate” or royalty producing asset, such as a website or book. Passive income takes many forms. Deciding which might work for you is your first step.
Money Mindset
This includes a range of different issues and may need to be addressed at different levels. 65% of those surveyed said that thinking about personal finance is a significant source of anxiety for them, and this may well tie into other stats that the study threw up. For example, nearly 40% said they felt their parents did a poor job of teaching them about personal finance (and 97% believe financial literacy should be taught in schools).
The study also asked about the sources people use for financial advice. While 28% reported getting advice from a financial advisor, many more reported relying on a spouse or other family member, or getting their advice from YouTube, TikTok or other social media platforms. It’s a big positive — in many ways — that there’s so much advice out there on personal finance, but it also means that some of it is false, contradictory, or just not right for you.
If money is causing you anxiety right now, it’s may well be time to consult a financial advisor, coach, or credit counselor, depending on what your issues are. Another perspective on your finances could be what’s needed to help you get back on track for the coming year.
About the author
Contributing Writer, Wealthtender
Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine.
Karen provides copy editing and proofreading services, as well as content creation services, at her website KarenBanes.com.
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Disclaimer: This article is intended for informational purposes only and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.
Frequently Asked Questions
What is the difference between the debt snowball and debt avalanche methods?
With the debt snowball method, you pay the minimum on every debt and put any extra money toward the smallest balance first, then roll that payment into the next smallest balance once it is paid off. The debt avalanche method targets the debt with the highest interest rate first, which usually saves the most in interest over time. The snowball delivers quicker wins that can help motivation, while the avalanche is generally cheaper, so the best choice is the one you will stick with.
What does it mean to pay yourself first?
Paying yourself first means moving a set amount into savings or investments as soon as you are paid, before spending on anything else. Automating that transfer turns saving into a habit rather than a decision you have to make each month. It also guards against lifestyle inflation, because you learn to live on what remains after saving.
How can I stop living paycheck to paycheck?
Start by tracking where your money goes for a month or two so you can see which expenses have crept up as your income has grown. Next, build a small cash cushion so a surprise bill does not end up on a credit card. From there, reducing one or two large fixed costs, such as housing or a car payment, usually frees up more money than trimming many small purchases.
What are the easiest ways for beginners to earn passive income?
For most people, the simplest starting point is investing in dividend-paying stocks, broad index funds or ETFs, which can generate income with little ongoing work once the money is invested. Rental property or a website or digital product can also produce income, but they typically require significant money or effort up front. Investment income is not guaranteed and investments can lose value, so it helps to match any strategy to your goals and timeline, and a financial advisor can help you do that.