Financial peace of mind 2024: Balancing income and expenses becomes increasingly challenging for Finns

The struggle to balance income and expenses continues to intensify for Finns, according to Danske Bank's Financial Peace of Mind 2024 study. Despite a forecasted wage increase outpacing inflation this year, many find it harder to manage their finance

By: helsinkitimes.fi

Jul 17 2024
0
0 Views

The struggle to balance income and expenses continues to intensify for Finns, according to Danske Bank's Financial Peace of Mind 2024 study. Despite a forecasted wage increase outpacing inflation this year, many find it harder to manage their finances.

The study, conducted in April, revealed that 32% of Finns find it difficult or very difficult to balance their income and expenses, a figure unchanged from last year.

However, those who find it easy or very easy to manage their finances dropped by two percentage points to 30%.

Older individuals and men are more likely to report ease in managing their finances compared to other groups. In contrast, low-income individuals and students are significantly more likely to struggle.

“For the first time in our survey’s history, more people in Finland find balancing their income and expenses difficult rather than easy. Rising interest rates and prices have certainly contributed to this situation, but the trend was already evident before the recent hikes,” noted Jens Wiklund, Country Director of Danske Bank Finland.

Since the study began, the difficulty in managing personal finances has increased annually. In 2018, only 22% found it challenging, while 40% found it easy.

“The situation worsens each year, and the changes are surprisingly swift. Balancing income and expenses is a cornerstone of financial peace of mind. While inflation plays a role, the decline began during the period of zero interest rates. A stronger culture of saving and investing could help Finns prepare for future dreams and unexpected expenses, thereby enhancing their financial peace of mind,” Wiklund added.

Hope on the Horizon for Finnish Households

Danske Bank predicts a more favorable outlook for Finnish households this year, with wages expected to rise faster than inflation. Many mortgage holders will also see their monthly payments decrease on their next interest adjustment date, even though interest rates are not dropping as quickly as hoped.

“This year looks brighter for Finnish households, as we forecast wages to increase faster than inflation. Although temporary rises in unemployment may dampen consumer confidence, many mortgage holders will benefit from lower rates at their next adjustment,” said Pasi Kuoppamäki, Chief Economist at Danske Bank.

In Finland, mortgages are typically tied to variable interest rates, with 96% of agreements from 2003 to 2023 featuring variable rates. In contrast, countries like Denmark, which scores highest in financial peace of mind, offer more stability with nearly 40% of mortgages fixed for 30 years and another 40% fixed for 5-10 years.

“The strong prevalence of variable-rate mortgages has undoubtedly impacted Finland’s performance, especially when compared to Denmark. Balancing income and expenses requires long-term financial planning, which is challenging if housing costs can change every three months,” noted Wiklund.

About the Financial Peace of Mind 2024 Survey

Danske Bank has been exploring the level of financial peace of mind in the Nordic countries through survey research since 2018. Based on this research, the bank developed an index measuring confidence in personal financial situations, the extent of financial worries, and future financial outlooks.

Data for the 2024 study was collected via an electronic survey conducted by YouGov's consumer panels from April 11 to 19, 2024. The survey targeted citizens aged 18 and over in each country, with representative samples by age, gender, and region. The sample size for Finland was 3,031, resulting in an average margin of error of ±1.6 percentage points at a 95% confidence level. For Sweden, Norway, and Denmark, the sample size was 1,006 interviews each, with an average margin of error of ±2.8 percentage points at a 95% confidence level.