About one in five Americans struggle to
pay for basic needs including food, shelter, and medical care, while
roughly one-third of U.S. consumers have a hard time making ends meet,
according to a new report from the Consumer Financial Protection Bureau
(CFPB).
The research, which took place last year, asked respondents 10 questions that were answered on a scale of 0 to 100. About one-third of Americans had financial well-being scores of 50 or below, meaning they have a high probability of not being able to make ends meet. A similar number of Americans scored above 61, which means they are unlikely to face financial hardship. The other third, of course, falls in the middle, somewhere between financial security and financial hardship.
What is financial well-being? "Financial well-being is a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life," according to the CFPB.
Differences in financial well-being do depend on income, but that's not the only, or even the most-important factor. Since a high earner can overspend, and not be in control of his or her finances, financial well-being is not driven by income. The key difference between people with positive and negative financial well-being is actually savings and financial cushions.
"The average financial well-being for adults with the lowest level of savings (less than $250) is 41, compared to 68 for adults with the highest level of liquid savings ($75,000 or more)," wrote the CFPB. "When we look at a related measure -- the capacity to absorb unexpected expenses -- we observe similar differences in scores."
Read more: Nearly a Third of All Americans Struggle to Make Ends Meet -- The Motley Fool
The research, which took place last year, asked respondents 10 questions that were answered on a scale of 0 to 100. About one-third of Americans had financial well-being scores of 50 or below, meaning they have a high probability of not being able to make ends meet. A similar number of Americans scored above 61, which means they are unlikely to face financial hardship. The other third, of course, falls in the middle, somewhere between financial security and financial hardship.
What is financial well-being? "Financial well-being is a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life," according to the CFPB.
Differences in financial well-being do depend on income, but that's not the only, or even the most-important factor. Since a high earner can overspend, and not be in control of his or her finances, financial well-being is not driven by income. The key difference between people with positive and negative financial well-being is actually savings and financial cushions.
"The average financial well-being for adults with the lowest level of savings (less than $250) is 41, compared to 68 for adults with the highest level of liquid savings ($75,000 or more)," wrote the CFPB. "When we look at a related measure -- the capacity to absorb unexpected expenses -- we observe similar differences in scores."
Read more: Nearly a Third of All Americans Struggle to Make Ends Meet -- The Motley Fool
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