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Average Americans Fail to See Economic Recovery

U.S. Employees Worry about Short-Term Money Management, Study Says

Aug 26, 2009 Louise Harris

American employees are not seeing an economic recovery in their personal finances that is becoming more visible on Wall Street, according to a new study.

Despite a 15.9% return on the Standard & Poor’s 500 index, employees are experiencing increased financial stress, said Trends in Employee Financial Issues, a report written by Danielle Perry of Financial Finesse. The Manhattan Beach, Calif., think tank released the report Aug. 14, 2009.

Employees struggle with debt and have trouble making ends meet, Perry said. They continue to take actions that would jeopardize their retirement, such as requesting loans on their retirement and hardship withdrawals to pay for current expenses. Some people have stopped putting money in retirement plans.

Financial Finesse compiled data from its online financial learning center. About 98% of those polled reported they are stressed about their finances, up from 97% in first quarter 2009. Of the 98%, 35% reported high or overwhelming financial stress. Last quarter, only 32% said that. Calls regarding bankruptcy or foreclosure have increased to 8% from 6%, Perry said. Those having trouble making ends meet rose to 11% from 3% since first quarter 2009. Nearly three-quarters of customers asked about money management, up from 64% in first quarter. In 2008, 58% were concerned with money management, and 43% mentioned money management in 2007.

Americans Cut Expenses, Save More

Perry said consumers are cutting expenses, trying to increase savings and improve their credit even if they have to downscale their lifestyle. “People are taking pride in their frugality and in controlling their expenses where they used to take pride in their lifestyles,” the report said.

Americans are more respectful of people who manage money well than those who waste money or overspend. The report predicted this attitude would prove good for the economy over the long-term and might bring an era of financial literacy. However, it will take a long time to get employees out of the financial hole. Job losses, declines in salaries/bonuses, declines in home values and lack of ability to secure credit currently have more of an impact on people than new saving habits.

Retirement Planning Not Going Well

Overall, financial wellness and retirement preparedness declined from the first quarter to the second quarter, the report said. The most notable decreases showed up in debt management, investments and retirement planning. Declines in debt management reflect employees’ worsening financial situations due to layoffs, lack of bonuses and lower salaries.

Because employees are focusing more on resolving immediate financial problems, such as paying credit card bills, they are not putting money toward retirement or investing, Perry said. They also want to put efforts toward improving money management to strengthen short-term savings.

Americans continue to struggle financially despite improvements on the stock market, according to Trends in Employee Financial Issues. They continue to be heavily in debt and cut retirement planning to support immediate problems.

The copyright of the article Average Americans Fail to See Economic Recovery in Personal Budgeting/Finance is owned by Louise Harris. Permission to republish Average Americans Fail to See Economic Recovery in print or online must be granted by the author in writing.

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