"We are seeing encouraging signs that sound financial behaviors are starting to set in," said Scott Spiker, CEO of First Command. "We are somewhat concerned that 28 percent of people say they will stop cutting back after a year, suggesting a possible return to damaging, overly consumptive behaviors. But on the whole, Americans appear poised to return to the traditional values of personal responsibility and self-reliance in the coming economic recovery."
The first-quarter Index results indicate that consumers have further intensified their belt tightening behaviors in a number of ways since the end of 2008, when it became strongly evident that consumer spending habits were dramatically changing:
- Attempted to reduce utility bills (58 percent versus 52 percent),
- reduced leisure activities (57 percent versus 54 percent) and
- reduced clothing purchases (52 percent versus 48 percent).
Additionally, many U.S. households indicated that they are practicing smarter spending strategies, including:
- shopping at discount stores (51 percent versus 49 percent),
- increasing coupon use (46 percent versus 44 percent) and
- buying generic (43 percent versus 37 percent)
These increases come at a time when Americans are experiencing strong anxiety over job security. As the U.S. unemployment rate rose to 8.5 percent – its highest point since 1983 – Americans reported being increasingly concerned about their jobs. In March, nearly one-half (47 percent) of Americans ages 25 to 49 reported being concerned about job security.
"Job loss remains a real concern for American families," Spiker said. "Moreover, 26 percent of U.S. consumers are extremely or very stressed about the current economic situation."
Still, U.S. consumers are increasingly optimistic about the length of the current recession. News reports suggesting that the recession may be over by the end of the year, combined with an uptick in the stock market, may have contributed to this heightened sense of optimism. As evidence of this, both the percentage of Americans concerned with the state of the economy (69 percent) and the stock market (43 percent) dropped four points from February to March.
"While we are still clearly in an economic crisis, recent encouraging economic news could have Americans feeling more comfortable putting their money into savings and investments in the coming months," Spiker said.
In fact, Americans’ savings and debt behaviors are already improving. From February to March, the Behaviors sub-index rose 16 points. This improvement was driven largely by a 38 percent increase in the amount survey respondents put into their retirement accounts, a common occurrence at this time of year due to tax time investing. Furthermore, the percentage of Americans with positive savings-to-debt ratios has increased 10 points since July 2008, indicating systematic changes in accumulation of savings and paying down debt behaviors.
Attitudes are improving, too. The Attitudes sub-index rose five points from February to March. Supported by the previously-mentioned increase in retirement savings, the surge in optimism helped drive the Financial Behaviors Index to a first-quarter finish of 86 – down two points from the end of 2008.
"The practice of saving increases financial optimism," Spiker said. "And it doesn’t seem dependent on how much one has accumulated in savings. Rather, the practice of saving creates an emotional lift."
Americans who have a financial plan through a financial planner continue to report greater feelings of security in the current recession. Seven percent of Americans with a plan through a planner are extremely stressed about the economy compared to 10 percent of Americans without a planner.
"In times of crisis, financial planners offer the training, knowledge and experience to help consumers take immediate vital action," Spiker said. "Our surveys consistently show that people with a financial plan and a financial planner report more positive and productive financial behaviors, intentions and attitudes than those without. The assistance of a knowledgeable professional can encourage disciplined, lifelong behaviors that enhance financial well-being and long-term security for oneself and one’s family."
