Tuesday, June 9, 2009, AM | 1 Comment
A survey conducted in February for Securian Financial Group found that, thanks to the recession and the decline in the financial markets, Americans are more focused on reducing their debt than spending. The number one financial goal of pre-retirees and second-highest goal of those already retired is to “pay off loans, overdue bills, and other debts.” Ranking third for both groups is to “save money for emergencies.” When people have a significant amount of debt beyond mortgage debt, their priorities shift.
What’s new is the dollar amount. Excluding the balance owed on a mortgage, $25,000 seems to be the so-called tipping point. That’s when someone’s focus tends to switch from saving for retirement to paying off loans, credit cards, and other I.O.U’s.
The survey also found that, compared to two years ago, pre-retirees are slightly less likely to use debt to finance a major purchase such as a new home, car, furniture, or vacation. Instead, individuals say they intend to save up the money needed.
In a Nutshell
Still, despite our best intentions, American consumers haven’t really made a dent in paying down our debt. Nearly half of us (47%) are making monthly payments on a car loan and the same percentage have credit card bills that we do not pay off each month.
As long as American consumers are reluctant to spend and, instead, are committed to saving more and reducing their debt, both the domestic and global economies will struggle.
It seems like a catch-22:
If we save, the national economy suffer.
If we don’t save, we as individuals and families suffer.