Are consumers' finances worse than their health?
June 29, 2012
The most recent Principal Financial Group Financial Well-Being Index -- a quarterly survey of American workers at small, growing companies -- reveals some interesting links between Americans' financial health and physical health.
Here are five observations about the state of fiscal and physical health among respondents to this survey:
- If you think Americans look out of shape, you should see their bank statements. In recent years, health agencies, along with public figures such as Michelle Obama and Michael Bloomberg, have expressed concern over an epidemic of obesity among Americans. The Principal Financial survey suggests that there may be an even greater epidemic of flabby finances. Survey respondents were even less likely to view themselves as financially healthy than physically healthy. 53 percent of respondents consider themselves physically healthy, while only 31 percent view themselves as financially healthy.
- Good intentions aren't always followed up with action. For some of the 31 percent of respondents who consider themselves financially healthy, this confidence may not be based on any type of concrete planning. Only 28 percent of respondents even have a household budget, and just 17 percent have created a financial plan.
- Many people view health as an investment. While the evidence suggests that too many people are failing to plan financially, they are at least thinking ahead when it comes to the relationship between good health and their financial future. Seventy-six percent of respondents think that by spending time on their health now, they'll reduce medical bills in the future. However, given how few have followed through on even rudimentary financial planning, there is no guarantee that all 76 percent of respondents are actually taking regular steps to stay physically healthy.
- People may be carrying faith in good health too far. Even good health can't make you immortal, but the survey indicates that most people fail to acknowledge their mortality by creating a will. 54 percent of those surveyed do not have a will in place. Some expressed the notion that they do not have enough money to worry about a will, but there are issues besides money -- most notably, provisions for the care of any children -- that should be addressed by a will.
- Emergency funds are recovering. Savings rates in the U.S. were chronically low even before the Great Recession, and household finances have taken a beating ever since. Still, if that recession taught Americans one thing, it was to prepare for setbacks, and the survey suggests that people are at least trying to beef up their emergency funds. Over the past two-and-a-half years, the percentage of survey respondents who have an emergency fund has risen to 66 percent, up from 61 percent. At a time when bank rates offer little immediate incentive to save, the growth of emergency funds is a sign that more people are starting to think ahead financially.
It makes sense that people view staying physically healthy as an investment that can save them medical expenses in the future. They might also want to recognize that this linkage works the other way as well and that following a sound financial plan can reduce stress and thus help people stay healthier. In any case, when it comes to both fiscal and physical health, consistent effort is the best path towards success.