Content Detail

Prudential Research & Perspectives Our original research and thought leadership provide vital insights into important issues for our clients, financial professionals, policymakers, and the general public.

Four Trends Making Budgeting More Important Than Ever

A key tenet of financial wellness is the ability to manage day-to-day finances, including budgeting and reducing debt levels. However, the state of personal finances today indicates that most individuals need help in these areas, with only a third of American households keeping a detailed budget.1

This paper explores four trends that are influencing consumer behavior in ways that make budgeting more important than ever:

1 - Social Media. 2 - Cashless society. 3 - Shift in employment. 4 - Outsized expenses.

  1. Social media influence is increasing consumer spending, due to customized marketing messages and the influence of peers’ social posts. Consumers who use social media while in the shopping process are four times more likely to spend more than they originally planned than non-users, according to a Deloitte consumer survey. About 47% of Millennial consumers use social media during their shopping journey.2
  2. An increasingly cashless society increases consumer spending by creating a disconnect between purchases and money leaving your wallet. Credit cards make it easier for people to spend more for discretionary as well as non-discretionary items, and the growth of mobile payments may further disconnect a purchase from a physical drawdown of money.
  3. Income is becoming more volatile as more people shift to temporary, part-time, and contract work. These arrangements negatively impact both pay and benefits, leaving employees burdened with funding a greater portion of healthcare and retirement costs.
  4. Big-ticket items such as home and college are growing faster than income, leading many to assume more debt which reduces their discretionary income.

Employers can help employees cope with today’s budgeting challenges, through financial wellness education and counseling, budgeting tools, and financial wellness self-assessment tools.

 

1 Gallup, "One in Three Americans Prepare a Detailed Household Budget," 2013.
2 Deloitte, “Navigating the New Digital Divide,” 2016.

 

 

0305724-00002-00