Frugality has not marked the American culture in a long time, but perhaps that is changing for a while. The recession has been very difficult on households financially and it’s not going to change any time soon. Though the economy is in recovery, U.S. Federal Reserve Chair Ben Bernanke has made it clear the pace of recovery will be slow.
So what does this mean for next year? If you go by what consumers are saying they have on their New Year’s resolution lists, there are good intentions about managing debt. Investment firms have been conducting surveys and the results show many households plan on getting control of their finances in 2010 including the amount of debt they are carrying.
Edward Jones, an investment firm located in St Louis, reported that a third of the respondents to their survey plan on increasing their savings rate in 2010 as a top resolution. They also intend on reducing their debt.
Similar results were obtained in a Fidelity Investments survey. Improving finances topped 43 percent of respondents’ lists. And the age group with the most financial pressures, 35 to 44, had the highest rate of financial resolve. Fifty-five percent of that group plan on improving their finances in 2010 which means saving more and spending less.
It is really not surprising so many people are including financial management as a resolution for the New Year. For many consumers the last year has been financially traumatic with many households finding the primary wage earner out of work. In some cases both employed workers have been laid off. It’s difficult to save money when in debt and there’s not enough money coming in to pay the month to month bills.
The economy is still rocky too. Though it is hoped that the bottom has been reached there is no certainty of that yet. Companies are still downsizing and the threat of unemployment is very real in many homes. Smart consumers are cutting back on their spending now and trying to pay down debt in the event the family finds it must live on unemployment benefits.
The reality is that 2010 is going to be another difficult financial year, but there is no time like to the present to begin making new financial resolutions. Over the last ten years, credit flowed like manna from heaven, but those days are long gone. Consumers plan on reducing credit card debt, paying off loans, and scaling back their expenses.
Credit card debt has been a particular threat to financial well being. The average consumer carries over $5,000 in credit card balances and the interest charged is high. Some investment counselors are telling consumers they need to pay off their credit card balances first and then begin saving money.
That is the path some consumers are taking too. To keep their financial New Year’s resolutions they are first paying off credit card balances and skipping contributions to retirement accounts or savings account. But the quicker those high interest loans are paid off, the sooner it’s possible to begin saving.
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