A secure retirement…no college debt…a home without a mortgage…a huge credit card line and zero balance… Do any of these notions suggest “financial independence” to you?
The concept means different things to different people. To the more literal minded, it embodies the notion of having enough investments and assets to live off the returns without being part of the paycheck crowd. To the more pragmatic, it can simply mean the ability to pay the bills and maintain a consistent savings and retirement plan.
What both visions (and all the visions in-between) tend to overlook is the interdependence it takes to get to independence. Solid finances are put together through a combination of budgets, savings, and investments. But the success of those endeavors for the individual comes through the cooperation and consideration of family, friends, business partners, and employers.
Take the family budget. Whether it covers a couple or a large brood, it only works if everyone cooperates, stays to spending levels, and avoids amassing debt. Savings plans need that kind of cooperation too, as well as availability and accessibility through institutions and employers. Investments? Many lean on others there as well, whether it’s friends and family or business connections like a financial advisor or wealth manager.
And this doesn’t take into account the many little things people do for one another to help money situations, from car-pooling to co-op groceries to shared vacation homes.
Unfortunately, there is not enough of this type of cooperation. Only one in three families follows a budget, according to a Gallup survey.1 Not all employers offer savings plans and among those that do, less than half of workers, on average, participate, according to the Bureau of Labor Statistics.2
No wonder, then, that a significant portion of Americans don’t feel close to a financially independent vision. Thirty-seven percent of the respondents in a recent MassMutual survey reported feeling “not very” or “not at all” financially secure. The majority (54 percent) described themselves as “somewhat secure.”
This MassMutual Middle America Financial Security Study was conducted by Greenwald & Associates and polled 1,010 working Americans ages 25-65 who earned annual incomes of between $35,000 and $150,000.
And while the survey pointed up concerns about financial security, it also had a silver lining: eight in 10 respondents reported a stable or improved level of financial security of the last 12 months.
Stable, of course, doesn’t equate to financially independent for many people. But it’s on the right path. And MassMutual believes more people can get on that path, provided they remember that independence is a group effort.
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1 Gallup, “One in Three Americans Prepare a Detailed Household Budget,” June 3, 2013.
2 BLS, “Defined contribution retirement plans: Who has them and what do they cost?,” December 7, 2016.