Financial Wellness: Perception and Reality

In today’s world, work and life are blending like never before, leaving many feeling both overwhelmed and stressed. According to MetLife’s 17th annual U.S. Employee Benefit Trends Study, the number one source of this stress – across generations, life-stages, and socioeconomic statuses is personal finances. Yet most employees, 63 percent, say they feel confident about their financial future.

Financial wellness means having control over day-to-day finances, being able to absorb unplanned expenses or financial shocks, and having a plan to save for future goals.

So, what’s behind this paradox? While employees may say they are confident, their perceptions don’t always match their actions. This disconnect can be seen in the number of employees who struggle to manage short-term expenses and are not on track to reach long-term financial goals — leading to situations that then cause even more stress. The gap between perception and reality can also prevent employees from gaining a true understanding of their financial situations and taking the steps needed to plan and save.

Prioritizing short-term over the future

Even among employees who identify themselves as financially confident, 4 in 10 live paycheck to paycheck, and 30 percent of those with a defined contribution retirement plan have dipped into it to pay for unplanned expenses such as a broken bone or new car transmission. While 76 percent of employees say they are willing to make short-term financial sacrifices in order to have a secure retirement, the reality is that only 50 percent of employees are directly allocating part of their paycheck to a savings account. 

Additionally, only 60 percent have a budget or plan for how to spend their money on an ongoing basis and actually stick to it. Older workers (Gen X and Boomers), and women in particular, are less likely to have an ongoing budgeting plan in place. This suggests that employees aren’t able to balance unexpected costs with planning for the future, which are two of the key elements needed to achieve financial wellness.

Immediate needs and future planning often compete for the same dollars and many are feeling the stress from trying to make progress toward long-term financial goals. 63 percent of employees, including those who are older and nearing retirement, report they are behind on their retirement savings and many younger employees haven’t even begun to put money away for retirement. Surprisingly, among employees who are confident about the future, only half are on track or have already reached their retirement saving goals. In fact, 53 percent of employees say they expect to postpone retirement due to their financial situation (up 15 percent since 2015).

Making financial wellness a reality

If you are struggling to meet daily expenses and not able to save for the future, tackling your finances might seem daunting, but it doesn’t have to be. Commit today to taking three simple steps that will help you take control:

  1.  Whether you prefer a notebook, a spreadsheet or an online tool, create a budget and stick to it.
  2.  Pay yourself first by setting up a direct deposit to divert a percentage of your paycheck into a dedicated savings account.
  3.  Save for retirement as soon as you start working and, if necessary, take advantage of catch up contributions once you are over 50.

The key to building financial wellness is remembering it’s a process that takes time. Taking these three steps now can have a significant impact on your future no matter where you are. You may also want to investigate whether you have access to a financial wellness program at your workplace. As employees look for more help in this area, an increasing number of employers are offering resources, education and support.

View our Financial Wellness EBTS Deep Dive, “Financial Wellness Programs Foster a Thriving Workforce” to learn more.