Oh, and one more tidbit for your "well, duh!" file: The survey also shows that those who have prepared a personal financial plan feel more confident and report more success managing money, savings, and investments than those who have not.
While the findings are more depressing than illuminating, they're none the worth sharing, just in case you want to refute someone who is delusional enough to think the economy is doing just fine.
Nearly two-fifths (38%) of the 1,508 household financial decision makers surveyed said they live paycheck-to-paycheck, up from 32% in 1997. Less than one-third (30%) indicated they felt comfortable financially -- down from 38% in 1997 -- and only about one-third (34%) think that they can afford to retire by age 65. The survey was conducted by Princeton Survey Research Associates International (PSRAI).
Those with financial plans -- and, I suspect, jobs -- feel better about their situations than those who don't have them. They're more likely to feel they are on pace to meet all of their financial goals, such as saving for retirement or for emergencies; feel "very confident" about managing money, savings, and investments; and are more likely to describe themselves as living comfortably.
The problem is only 31% of respondents said they had a comprehensive financial plan. About two-thirds (65%), however, reported that they follow a plan for at least one of their savings goals.
The survey also found more than half of respondents said "it's hard for me to know who to trust for financial advice" (55%), "investing seems complicated" (52%), and "I'm worried about losing my money if I invest it" (55%).
Kevin R. Keller, CEO of CFP Board, called those fears understandable given recent revelations about financial fraud, and the manipulation and abuse of clients by dubious financial professionals. Do you agree? More importantly, do you think fear of investing is perpetuating this cycle of financial gloom-and-doom -- paycheck-to-paycheck living, with no real end in sight?
@Noreen, these figures are truly depressing, though you've certainly done your best to bring some perspective and levity to the situation.
"Oh, and one more tidbit for your 'well, duh!' file" is a phrase I plan to borrow early and often!
But the whole economy just gets scarier by the day, doesn't it? And I for one, don't see any relief in sight from whichever of our "lesser of the evils" presidential candidates gets elected.
So, what to do? Why add a couple more items to the "Well, Duh" file of course!
Well, Duh #1: According to a CNN study, 64% of Americans lack the means to pay for a $1,000 emergency expense, but only 17% of survey respondents would be able to borrow the money from family or friends. Only 12% have something they could sell or pawn. That's not a razor-thin margin; that's NO margin.
Well, Duh #2: "Just Keep Working" is the new retirement strategy. In the last three years alone, the number of workers over 65 has increased by 22% according to the Retirement Fitness Mass Market Report conducted on behalf of Wells Fargo by Harris Interactive. Twenty-five per cent of wage earners making less than $100K per year say they'll have to work until age 80 to afford retirement.
@Street Smart, I have to agree that the economy is a scary place, but not as scary as the way some people treat their savings. I am at an engineering conference this week and I was having a conversation the other night with a few other engineers, and one of them was telling me he lives pay check to pay check and has no savings and thene explained to me all the debt he is in. I just find it so crazy that he can be living on the edge money wise. I think a lot of these issues come down to spending, and more spending.
@TelecomFreq, I agree. I think people feel like they're so far behind that they'll never get ahead. I think they spend in the short term because the long term is too hard to contemplate.
And second quarter numbers just came out. They make you want to either pull up the covers, close the blinds and hide your gold under the mattress or go out for expensive lattes and cocktails. Maybe both!
I still agree that everyone needs a financial plan, no matter how simple it is. Fail to plan is a plan to fail. A little planning plus some financial knowledge will save many people from finanical ruins
I agree that many live paycheck to paycheck, but there is also the effect that the rate of return on savings id dismal. Inflation seems to be running 2-3%/year ( except for the things we all use, like groceries and energy). A saving rate of 1% is considered good. I would ask- why save at these rates? you are better off buying gold jewelry ( which Indians count as savings, but we consider spending).
I totally agree with you guys that the current economy situation is challenging and the FED policy doesn't help us. To make a good investment return from the current rate is kind of joke.
However, it doesn't explain why 30% people are living on paycheck-by-paycheck. This is different thing. What's the reason for those people living on paycheck bu paycheck? It could be they don't have good skills to find a good job, or they don't have other choice for some reasons.
But I noticed some people don't make much money, but still planing and talking about some expensive vacations, fancy cars, cool gadgets. They do live on paycheck by paycheck. On the other hand, I saw some newcomers working as general labor. They don't get a fat check every month. But they save a lot, they don't plan for any expensive vacation (instead they just do some summer camping with kids). They don't pay cable companies to watch TV. instead they set up antenna in the backyard and watch high definiation channels for free. They save enough money to send their kids to top univesities, etc. I believe you can find some this kind of people around you.
They achieve all these by saving, not investing. Most of them don't have enough knowledge to invest. But they know they have to live in their means. They shall not spend more then what they earn. Maybe this kine of thinking can be some help for other people.
Basic Money Management Skills have not been taught to most ordinary Americans.
I believe basic Skills on this issue and especially the importance of Savings as against Consumption should be imbibed in the way most Americans think.
The philosophy of not spending more than you earn is Anathema to the way everyone in America(from the President of the Federal Reserve downards) thinks.
They constantly say-Spend,Spend and Spend!!!
We need Consumption to get our economy going.
The entire Financial System is geared towards this way of life.It also has the bad effect of making us dependent on Foriegners (like the chinese and Japanese) to keep financing our lifestyles.
Your Gonna Like this chart I borrowed from ZH,Americans are starting to once again Save More cash.
Inspite of the fact that the economy is very anaemic.What this probably means is that people are starting to religiously put aside more of their income,Saving for a rainy day.
Is this because people expect things to get worse going ahead(and so they want to prepare themselves in advance???)
I dont know.
Americans are saving 4.4% of their Income as Savings.This is the Highest its been since August 2011.
But its a trend to watch out for sure.
When American Consumers start saving,Chinese manufacturers start worrying!!!
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