Written by Amy Summers, Freelance Finance Writer
The last few years have been characterized by record-high inflation rates, market uncertainty, and a cost of living crisis, thus making millions of businesses and individuals in the United States concerned about their finances.
Although the Federal Reserve has tried to stabilize inflationary pressures, USA Today’s analysis of U.S. Census Bureau data reveals that nearly half (47%) of Americans remain financially stressed. The report also reveals that financial stressors disproportionally affect certain Americans not only based on age groups but also according to their geographical location. In this light, this article takes a closer look at the top nine states whose residents experience the most financial stress, while also suggesting ways to manage and cope with these stressors for improved financial health and stability.
The most financially stressed-out states
According to USA Today, Mississippi is the state in the most severe financial distress, with 57% of residents reporting high levels of stress due to price increases. Such findings can be associated with the fact that the Magnolia State has the highest poverty rate, at over 19%, as per data from the U.S. Census Bureau. Since poverty can make it challenging to pay bills on time, residents of Mississippi also struggle with having one of the lowest average credit scores in the country.
Mississippi is closely followed by Nevada, Alabama, and Oklahoma, with 54% of respondents in each state reporting that they are very stressed about financial challenges like price hikes. Nevada being a close second can be attributed to the fact that much like Mississippi, the state has ranked near the bottom of state rankings for education, financial literacy, and healthcare, all of which otherwise affect financial capacity and wellness. Alabama reported the highest personal bankruptcy filing rate in 2022, while high levels of financial stress in Oklahoma can be explained by the state’s low salary average.
Meanwhile, Louisiana and Florida are almost neck and neck at the fifth and sixth spots, with the rate of high financial stress reported at 53% and 52%, respectively. Money problems in both states can be correlated with their vulnerability to natural disasters and residents’ low average credit scores. Georgia, New Jersey, and New Mexico then round out the top nine most financially stressed-out states, with 51% of residents bearing the strongest brunt of inflation. Although some of the factors contributing to financial stress are systemic, the following section provides strategies for individuals and businesses in these states to better manage their finances.
Strategies for managing financial stress
Financial stress is a major issue for Americans, not least because of the sizable number of business owners and entrepreneurs in the U.S. In fact, according to the Global Entrepreneurship Monitor, 19% of U.S. adults are in the process of opening a business or have done so in the past 3.5 years.
Small businesses make up 43.5% of the U.S. GDP, and there are over 33 million small businesses in the country. However, despite their large role in the American economy, small business owners struggle with financial stressors like cash flow issues, adhering to new regulations, and other expenses. In fact, research published in the International Entrepreneurship and Management Journal found that financial stress plays a large role in entrepreneurs’ motivations to quit, and business owners require appropriate tools and interventions to get back on track.
Balancing books and complying with financial regulations can be difficult for entrepreneurs to manage on top of other obligations. Tools like automation software thus play a crucial role in helping business owners manage their finances with less stress. For instance, revenue recognition tools from Softrax are compliant with ASC 606 and IFRS 15 and allow business owners to streamline their revenue processes. This enables business owners to shift their attention from tedious day-to-day tasks like revenue tracking and recognition and focus on more pressing, strategic issues — reducing stress and improving workflow and efficiency.
On the other hand, a common financial stressor among individuals is credit card debt. A previous post entitled ‘Credit Card Debt This Summer? You’re Not Alone’ explains that total credit card debt surpassed the $1 trillion threshold for the first time in 2023, signifying a financial crisis that affects not only the physical and mental health of millions of Americans but also professional aspects like workplace productivity and performance.
Like businesses, professionals can also rely on digital tools to manage credit card debt and improve their overall credit score. For example, financial planning software You Need a Budget (YNAB) allows you to assign money to priority categories, including credit card payments, as you earn it, thus providing a realistic approach to reducing debt and assessing your overall financial capacity.
Additionally, if you’re an employee currently struggling with financial stressors like credit card debt, consider checking with your employer if they offer financial wellness benefits from TrueConnect. Check out the rest of the TrueConnect website to learn more about how our services and resources can be included in employee benefits packages for improved financial health and literacy.
