It appears that Alabama, nicknamed the Yellowhammer State, has hammered home the importance of financial responsibility.

Alabama ranks first in a new Forbes Advisor study of the states where residents are most and least financially disciplined. Alabama earns a score of 83.28, with 100 being perfect. It’s followed by Arkansas (81.56), New Jersey (80.82), Washington (80.71) and Colorado (80.33).

At the other end of the spectrum, Idaho sits at the bottom with a score of 51.74. It’s preceded by Hawaii (58.86), West Virginia (64.68), Montana (65.03) and Vermont (65.56).

For this study:

  • We recently surveyed 5,001 Americans to measure the extent of their financial discipline. Survey results include all 50 states. We asked eight questions designed to cover the most essential characteristics of healthy, disciplined personal finance.
  • Pairing the survey findings with recently published data from the Federal Reserve, we established for each U.S. state a financial discipline score that accounts for, among other things, habits related to budgeting, saving, spending, credit cards, retirement accounts and financial goals.

Key Findings

  • Residents of Alabama, Arkansas and New Jersey are the most financially disciplined, while residents of Idaho, Hawaii and West Virginia have the most room for improvement
  • Six in 10 Americans (60%) say they have a budget that directs all of their spending
  • Just 4 in 10 Americans (41%) say they regularly contribute money to a retirement account
  • Men (47%) are more likely than women (37%) to have at least three to six months of expenses set aside in an emergency fund
  • Millennials (66%) are most likely to pay off their credit card balance in full each month; Gen Zers (11%) are most likely to make minimum payments or no payments at all

Alabama Leads the Pack Among Most Financially Disciplined States

Jeff Roberts, an Alabama-based private wealth advisor with Ameriprise Financial, says he’s not surprised his state tops the Forbes Advisor list. Why? Because, he says, generations of Alabamians heed this mantra: “Live within your means.”

“We are far from the wealthiest state in the country, so financial responsibility has to be an essential component in our lives. From less, we have more,” Roberts explains.

In 2021, Alabama ranked 47th among states for median household income ($53,913), according to the U.S. Census Bureau.

Roberts also cited the state’s work ethic as a factor influencing Alabamians’ personal finance regimens. In April 2023, Alabama had the fifth-lowest unemployment rate among the states (2.2%), trailing only South Dakota, Nebraska, New Hampshire and North Dakota.

In lauding Alabama’s personal finance prowess, Roberts noted that we can’t take money or possessions with us when we die. “You’ll never see a U-Haul behind a hearse,” says Roberts, quoting an expression popular among preachers and highlighted by actor Denzel Washington during a 2015 commencement speech in New Orleans.

From the Forbes Advisor survey, here’s further evidence of the financial discipline of Alabamians:

  • No. 1 ranking among states where residents say they always follow their budget (82%). By contrast, just 3 in 10 Americans (33%) say they always adhere to their budget.
  • No. 1 ranking among states where residents report they always save a portion of their monthly income (63%). That compares with nearly 1 in 3 Americans (29%) who say they always save a portion of their paychecks.
  • No. 3 ranking among states (behind Delaware and Washington) where residents say they regularly contribute to a 401(k) or IRA (61%).
  • Fifth-place tie with Arizona and New Mexico among states where residents say they pay their credit card balances in full each month (78%).
  • No. 10 ranking among states where residents indicate they had a budget in place (68%).

Slightly tarnishing Alabama’s No. 1 standing for financial discipline, a couple of troubling statistics popped up in the Forbes Advisor survey:

  • No. 1 ranking among states where residents say they took out a payday loan in the past three years (62%). The Consumer Financial Protection Bureau says a typical two-week payday loan carries an annual percentage rate (APR) of nearly 400%.
  • Fourth-place tie with New Jersey (69%) among states where residents report they make small impulse purchases. Regular impulse purchases can cause people to overspend.

Making the Grade With Financial Education in Alabama

Another factor working in Alabama’s favor in terms of financial discipline is financial education. Alabama is one of 19 states that require students to gain substantial knowledge about personal finance before graduating from high school. Students in Alabama learn personal finance principles as part of a one-semester career preparedness course.

In 2021, Alabama earned a B on The Nation’s Report Card on Financial Literacy, published by the American Public Education Foundation. That’s up from a grade of C on the previous report card. The foundation says Alabama would need to create financial literacy standards for third- through sixth-graders as well as eighth-graders to lift its grade to an A.

Alabama Republican state Rep. Andy Whitt, a Huntsville banker, has been pushing a legislative proposal that would require ninth-graders in public schools to complete a full-fledged financial literacy course.

“As a community banker for over the last 30 years, I have continuously witnessed the decline in the consumer’s ability to understand the basic skills dealing with personal financial situations,” Whitt says. “What people don’t realize [is] these are not just math skills, they are life skills that everyone needs.”

Idaho Sinks to Bottom in Ranking of Most Financially Disciplined States

Unlike folks in Alabama, it seems that some people in Idaho could use a few lessons in personal finance. For instance, just 30% of Idahoans in the Forbes Advisor survey say they have a budget that governs all of their spending. That’s the lowest percentage among all of the states.

According to the survey, other blemishes on Idaho’s report card for financial discipline include:

  • No. 1 ranking among states for the lowest share of residents (19%) who say they regularly contribute to a 401(k) or IRA.
  • No. 3 ranking among states for the lowest share of residents (23%) who indicate they have at least three to six months' worth of expenses set aside in an emergency fund. Generally, that’s the recommended size of an emergency fund. One in five Americans (19%) say they don’t have an emergency fund, according to the survey.

The news in the Forbes Advisor survey wasn’t all bad for Idaho, though:

  • No. 1 ranking among states for the lowest share of residents (30%) who indicate they made small impulse purchases in the past three years.
  • No. 4 ranking among states where residents report paying off credit card balances in full every month (79%). Nearly one in 10 Americans (7%) say they make only the minimum payment on their credit card or make no payment at all, according to the survey.
  • Fourth-place tie with Missouri and Oregon for the lowest share of residents (10%) who say they’ve taken out a high-interest payday loan in the past three years.

Justin Samples, a private wealth advisor with Ameriprise Financial in Boise, says he was surprised by his state’s poor showing in the Forbes Advisor survey. In general, Idahoans exhibit a strong work ethic, avoid debt and demonstrate investment savviness, he says.

“They tend to be conservative, risk-averse investors who are interested in long-term growth rather than short-term gains. Clients that we serve in Idaho have consistently avoided speculative investments that have seemingly dominated headlines over the last five years,” says Samples. “Overall, Idaho investors are known for their focus on practicality and achieving steady, reliable investment returns.”

Idaho Beefing Up Financial Literacy for Students

Fortunately, personal finance help is on the way in Idaho—at least for future generations.

Starting with the 2023-24 school year, personal finance will be incorporated into the curriculum for ninth- through 12th-graders attending public schools. On the most recent Nation’s Report Card on Finance Literacy, Idaho earned a C for financial literacy instruction.

Debbie Critchfield, Idaho’s superintendent of public instruction, helped spearhead the effort to add personal finance coursework in her state’s public high schools.

“Our kids need to be taught how taxes, health insurance, credit scores, interest and loans work, among other important financial skills,” Critchfield wrote. “The time to learn about retirement plans should be before our students enter the workforce, not when they realize they need one several years into their careers.”

Methodology

  • Scores are based on both proprietary survey data, along with data published by the Federal Reserve in April 2023.
  • Each state’s score is based primarily on answers to eight survey questions asked of a sample of 100 residents in that state commissioned by Forbes Advisor and conducted by market research company OnePoll, in accordance with the Market Research Society’s code of conduct. Data was collected from March 21 to April 13, 2023. The margin of error is +/- 1.4 points with 95% confidence.
  • Averages across the sample of residents account for up to 21 of the total 23 possible points a state earns to indicate its extent of financial discipline.
  • Additionally, data published by the Federal Reserve, indicating the average household debt-to-income ratio in each U.S. state influences our scores. The relative health of each state’s debt-to-income ratio accounts for two of the total possible 23 points a state earns.
  • Point tallies were adjusted to a 100-point scale, with higher scores representing more financial discipline and lower scores representing less financial discipline.

Financial Discipline Survey Questions

Question Points possible
1. Do you have a budget that directs all of your spending?
3 points
2. How frequently do you follow your budget?
4 points
3. How frequently do you save a certain portion of your income?
4 points
4. Which best describes how you manage your credit card balance?
3 points
5. Which best describes how you invest your money in a retirement account?
2 points
6. Which best describes the financial goals you set for yourself?
2 points
7. Have you taken our a payday loan or cash advance in the last three years?
1 point
8. Which best describes your habit, if any, in making impulse purchases?
2 points