The approach to personal finance varies significantly among Americans, but a recent study by PYMNTS indicates two predominant strategies.
Among U.S. consumers, only 40% identify as “planners,” reflecting a more proactive and foresighted approach to managing their money. This figure marks a decline from the nearly 50% of consumers who reported using similar planning strategies in February of the previous year, according to the report.
On the other hand, a significant 60% of consumers approach their financial affairs reactively, earning them the designation of “reactors,” according to the report.
Those categorized as “planners” typically maintain at least $2,500 in savings and keep their credit card debts below $2,000 on average, while also making consistent payments on their outstanding balances. In contrast, “reactors” tend to carry higher credit card balances and have less savings, often neglecting to manage their credit card payments as regularly.
The observed drop in the number of “planners” suggests that more consumers are increasingly experiencing financial strain, according to PYMNTS. The two groups also display differing financial priorities, with “planners” often focused on retirement savings, while “reactors” typically prioritize debt reduction.
Further insights from a report by Fidelity Investments, released earlier this month, show that the average 401(k) account balance in the first quarter was $127,100. Meanwhile, IRA and 403(b) accounts averaged balances of $121,983 and $115,424, respectively.
As part of their retirement planning, a survey by Northwestern Mutual revealed that Americans believe they need approximately $1.26 million saved for a comfortable retirement. Almost one-third of consumers who identify as financially reactive reported prioritizing debt reduction as their main goal.
The Federal Reserve Bank of New York reports that Americans collectively held $18.2 trillion in debt by the end of the first quarter of this year.
Investments and savings constituted 12% of the monthly financial allocations among “planners,” as revealed by PYMNTS.
Generational distinctions in financial management approaches were also highlighted in the survey. A striking 73% of Generation Z respondents identified as “reactors,” while the Baby Boomer generation showed a tendency toward planning, with 54% of them classified as “planners.”
As the impact of inflation and other economic pressures mount, more high-income consumers now identify as “reactors.” According to the study, 52% of high-income individuals categorized themselves in this manner. The number of earners classified as “planners” has decreased by 25% from February of last year to January of this year, as reported by PYMNTS.
Additionally, U.S. Census Bureau data indicates that the real median income for American households surpassed $80,600 in 2023.
