Motivations and Barriers to Addressing Financial Issues

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Motivations and Barriers to Addressing Financial Issues

The most common life event that motivates people to begin paying attention to their finances is the desire to save for retirement, followed by moving and changing careers. Some barriers that prevent people from starting a budget include procrastination, feeling restricted, and the belief that it is too time-consuming.

Motivations

Life Events that Trigger Attention to Finances

Millennials

  • The top life event for which Millennials begin addressing their finances is moving at 19.0%.
  • The other top life event for which Millennials begin addressing their finances is getting married at 11.4%.

Generation X

  • The top life event for which Generation X begins addressing their finances is retirement at 32.2%.
  • Secondly, 15.2% of Generation X begins addressing their finances so they can send their kids to college.

Baby Boomers

  • The top life event for which Baby Boomers begin addressing their finances is retirement at 51.8%.
  • Another 15.3% of Baby Boomers begin addressing their finances so they are able to move.

Overall

  • Overall, the top life event that spurs people into addressing their finances is retirement at 24.3%.
  • In second place is moving, at 14.3%.
  • Third is changing careers at 7.4%.
  • Fourth is sending kids to college at 7.0%.
  • Fifth is getting married at 6.7%.
  • Sixth is having a child at 5.1%.
  • Seventh is going back to school at 4.9%.
  • Eighth is starting a business at 4.7%.
  • Last is losing a job at 2.8%.

Reasons for Beginning a Budget

  • Assuming that when people begin to follow a budget is the first time they begin to address their finances, the top reasons for starting a budget would also be reasons for addressing their finances. According to a survey conducted by Nitro, the top reasons for following a budget are the following (respondents could choose more than one answer):
    • They want to avoid frivolous spending (65.5%).
    • They want to save for an emergency (63.5%).
    • They want to pay off credit card debt (53.8%).
    • They want to save for retirement (40.0%).
    • They want to save for a vacation (39.7%).
    • They want to pay off student loan debt (26.0%).
    • They want to pay off an auto loan (24.5%)
    • They want to pay off a home mortgage (22.9%).
    • Their relationships were strained because of money issues (21.4%).
  • A second, more recent survey from Debt.com shows that the following general reasons are most common for beginning a budget (respondents could choose only one answer):
    • They want to increase their savings or wealth (43%).
    • They want to pay down their debt (31%).
    • They want to save for retirement (13%).
    • They lost their job or income (10%).
    • They got a divorce or lost their spouse (3%).
  • People between the ages of 23 and 38 (Millennials) are most likely to use a budget (74%) compared with older generations (67% for both Generation X and Baby Boomers), and Generation Z (50%).

Barriers

  • Procrastination is a barrier to addressing finances as people tend to put off tasks that are hard. Budgeting is perceived as difficult, so people avoid making it a priority in their lives.
  • Feeling restricted is a barrier for 11% of people to establishing a budget and following it, and budgeting is one of the first steps people take when beginning to address their finances.
  • Women (26%) are more likely than men (14%) to say that addressing their finances through a budget makes them feel anxious or bad about themselves (21.43% overall).
  • Many people, both men (31%) and women (32%), believe that because they do not have much income, they don't need a budget.
  • The number one barrier for Generation X and Baby Boomers for not creating a budget and beginning to address their finances is that they believe they don't need to track their spending.
    • According to Howard Dvorkin, CPA and chairman of Debt.com, "In two decades as a financial professional, I can't tell you how many people tell me, 'I know debt is a huge problem in this country, but I thought I could handle it'... It's human nature to expect the best and not plan for the worst, so many otherwise smart Americans refuse to budget because they don't think they need it."
  • Another reason people give for not addressing their finances through a budget is that they don't have time (24.54%) to appropriately manage their spending.
    • Men (29%) are more likely than women (21%) to say that managing their finances through a budget takes too much time.
  • Married people sometimes do not address finances because it causes disagreements with their spouse (women (6%) slightly more than men (5%)).
  • The two methods of budgeting most people would like to try is pen and paper (27.34%) and mobile apps (22.94%).

Research Strategy

Despite extensive research through consumer surveys, articles written by experts, and formal scientific studies, we were unable to find a breakdown of barriers to addressing finances by generation. We did find some information on which generations are more likely to follow a budget, which we used as a proxy for addressing finances, since we assumed that a budget is often the first step people take when they begin to pay attention to their finances. We also found some information on the differences in the barriers to budgeting between men and women, so we included that data as well.
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