Changes in Main Street’s money habits
TEXT OF INTERVIEW
Steve Chiotakis: It’s a source of endless debate around these parts. Has the collapse of the economy led to a change in ways on the part of Wall Street? No comment. And what about Main Street? Well, next week Kiplinger’s Personal Finance Magazine, and the financial company Thrivent release a survey on family finances. Bottom line? People are still worried about the economy, and they’ve become more frugal to boot.
Janet Bodnar is an editor at Kiplinger’s. Thanks for joining us.
Janet Bodnar: Oh, my pleasure, Steve.
Chiotakis: So the big news here seems to be that 84 percent of Americans are still really worried about finances, right, despite talk of recovery. I mean what accounts for that, do you think, in your mind?
Bodnar: You know, we always say that pocketbook issues — jobs and things like that — are lagging indicators. People are more concerned now about losing their jobs than they were a couple of years ago. So as long as that concern is in the back of their mind, they’re going to be worried about their finances. So even though the Wall Street bull market has been going on for a year or so now, people don’t quite believe it yet.
Chiotakis: People worried about losing their jobs. But on the other side, people are less concerned about credit card debt.
Bodnar: Isn’t that interesting. And it’s almost a reversal of numbers over the last couple of years. The jobs numbers went up from 15 percent as a worry factor to 18 percent, and credit card went down from 18 to 13. And I think what you’ve been seeing is people pulling back, people pulling back on what they’re been buying, people working to pay off credit card debt. And it seems as if people are having some success with that, which I think is some good news from the survey.
Chiotakis: Janet, we’ve heard often that there’s this sense that Americans have that they’re not going to be able to do as well as their parents financially. And here we see that 60 percent of people say their most important financial goal is to maintain stability and only a little more than 20 percent are focused on building assets. I mean, what does that say about American families’ expectations for the future?
Bodnar: When we asked people how they felt about this two years ago, the numbers were very different. They were very close. The stability goal still outpaced the idea of building assets, but it was much closer. It was really around 40 percent in both cases. Now you have this huge shift toward 60 percent maintaining stability. So what’s going on here? It may be part of this new frugality that people have been talking about, that people are going to be less likely to take on debt. They want to pay off their debt, they’re going to be more sober about their finances.
Chiotakis: I want to touch a little bit on the frugality before we wrap things up. Your survey shows 74 percent of families say they’re trying to be more frugal. But isn’t that the point? I mean, we all want to be more frugal. It’s whether we can or whether we actually will keep doing that.
Bodnar: Well, you know, that’s kind of interesting. A couple of things. In the Thrivent Financial-Kiplinger survey, one of the questions that we tried to get at was the idea of values and family values. And we actually did ask people whether their personal values have been aligned more with their financial values as a result of the economy over the last few years. And the result was very positive. You know, people did say, yes, they were trying to do that. Whether they’ll actually change their habits long term is kind of open to question. I mean, I think Americans do tend to be spenders. But again, the very fact that they’re interested in maintaining stability, the fact that they’re interested in paying off credit card debt, that sort of thing really does make a difference. So I think that people are becoming more sober about how they’re spending, and hopefully about how they’re planning for the future. But whether we’re going to see any huge sea changes, it’s hard to tell just yet.
Chiotakis: Janet Bodnar, the editor at Kiplinger’s, thanks for being with us this week.
Bodnar: Oh, it was my pleasure, Steve.
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