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Financial Security Index ... Up

Monday, July 29, 2013 - 10:07 AM

"Increased optimism is also more broad-based than before. While Americans earning more than $75,000 per year had long reported improving financial conditions, that sense of economic well-being is now filtering down into the middle class earning $50,000 to $75,000 per year, McBride says. In that group, 87 percent reported that their overall financial situation was the same or better, versus just 13 percent who said it was worse.

The only area where Americans haven't shown substantial improvement involves their level of savings.

That has always been the weakest link in financial security, McBride says. "That continues to be the case. In the two and a half years we've been doing this poll, people have, month in and month out, pointed to savings as a real sore spot.""

Yeah!  We do feel better about our financial situation; but we cannot save any money though. 

What is wrong with this picture??:D

51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,427
1. Monday, July 29, 2013 - 11:08 AM
Possible answers to "what is wrong with this picture?":

1.  Pent-up demand (increased spending after extended period of uncertainty where spending was cut back)

2.  Immediate gratification (I want what I want and I want it now)

3.  Social pressure (Saving money isn't ****y or cool - at backyard BBQs it's more fun to talk about your latest toy, not your progress towards building up your emergency fund)

4.  "That was a temporary blip.  I'm glad we won't have to go through that again.  We're out of the woods." thinking.  

5.  Effects of (hidden) inflation - the cost of your basic needs (food, housing, gas, medical care, etc) is increasing faster than your income, and faster than government figures would indicate. 
pearlbrownpearlbrown1,491 posts since
Nov 2, 2010
Rep Points: 6,474
2. Monday, July 29, 2013 - 3:18 PM

The middle class people now have cut back so much 

that there might be a chance they can make it

going forward.
RicochetRicochet135 posts since
Jan 19, 2010
Rep Points: 367
3. Monday, July 29, 2013 - 6:10 PM
How people feel and what thier financial condition is in reality are two different matters. 

Example: We certainly feel better financially due to the stock market jumps and the overall "no news is good news" mentality.  Out of curiosity, we did a rough average monthly budget since I did not seem to be able to save anything lately.  Well, huge property taxes, utility bills, insurance, landscaping, house repair, mortgage,, daily expenses (food, gasoline, drugstore), etc. basically eat up all our income, with little left.  The only gratifying matter is that I deduct 12% of my paycheck to 401K (with 11% company matching).  The budget shows that we can no longer contribute to Roth IRAs that we have done in the past. 

It is humbling for me to realize that we now also belong to the category of majority of Americans that are simply unable to make any savings at all.

It is my opinion and observation that it is especailly difficult to save in the current financial environment.  My salary has increased steadily for the past years; however, it is increasingly difficult to make ends meet on a month-by-month basis.  We have significant amount of reserve savings from the past thus the situation is not that desperate; but think about the young generation who are married and have children to raise; but no cash reserve at all; I hate to be in that category. 

51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,427
4. Monday, July 29, 2013 - 7:21 PM
Yup, I'm real "optimistic".

One in five American adults will struggle to pay medical bills this year. A sudden accident or frightening diagnosis can touch virtually anyone, unleashing mountains of bills even on the insured. In fact, medical bills are the leading cause of personal bankruptcy, a last resort after millions of families have drained their savings, maxed their credit cards and even refinanced their homes. To further understand the complexity of health costs, NerdWallet Health has compiled a series of estimates highlighting the strain of medical bills in 2013.

NerdWallet Health Estimates 56 Million Americans under 65 will Struggle with Medical Bills in 2013
ShorebreakShorebreak2,696 posts since
Apr 6, 2010
Rep Points: 14,620
5. Tuesday, July 30, 2013 - 8:00 AM
Re:  #3. Monday, July 29, 2013 - 6:10 PM

Rhett, sometimes we forget about the money which is deducted from our gross paycheck, which is the beauty of automatic savings opportunities at a gross level - you don't see it, you don't spend it.    As long as you continue to contribute 10% to your 401(k) and receiving an 11% company match, then in the strictest sense you are saving 10% (really 10+11 = 21% if you are fully vested in the company match), which is excellent.  In this case, you are proving your point - that how one feels (bad) and one's financial condition (very good) are two different matters.

As life (and economic) circumstances change, sometimes it becomes more difficult to save at the same levels we have in the past.  Individuals who have been extraordinary savers in the past can easily become discouraged when they cannot sustain that pace. 

IMO what is important is to maintain the savings habit and continue to look for ways to economize where possible.  Also as one approaches retirement, it is wise to consider alternatives - smaller home (smaller utility bills, lower taxes, reduced landscaping bills, etc), less expensive area of the country, etc., although of course those alternatives may not be appropriate or desirable for everyone. 
pearlbrownpearlbrown1,491 posts since
Nov 2, 2010
Rep Points: 6,474