In 2008 the U.S. saw one of the most dramatic declines in the American economy when risky mortgage investments sent both home and stock prices downward, unemployment reached record levels and the U.S. financial system needed a bail-out from the government in order to survive. Five years later, Americans have learned something about spending.
The Survey Says
A recent survey by Fidelity investments in 2013 uncovered some interesting findings on Americans and their current spending habits:
- Fifty-six percent of Americans have gone from worrying about managing their money to being confident about their good spending habits.
- Forty-two percent of those polled are contributing to workplace saving accounts such as IRAs and 401ks.Five percent of those are contributing less, and fifty-three percent have not made any changes.
- Fifty-five percent feel they are more prepared financially than before 2008.
- Seventy-two percent have less personal debt than before the crisis. Interestingly, forty-nine percent of people have reduced their debt due to the crisis.
- Forty-two percent of those who were worried about money management in 2008, and now feel confident, have increased the size of their emergency funds to better equip themselves for possible future emergencies.
For those in the financial sector this is great news for the economy and the nation as a whole. The year 2013 has seen strides in reducing unemployment and consumer spending. But if anything, this recent poll suggests as Americans have begun to spend again they’ve learned how to spend smarter.
Developing Good Spending Habits
As young adults leave high school and head off to adulthood, one of the most difficult concepts we face is our inability to develop good spending habits. With credit cards being tossed at these new adults it is no wonder so many college students graduate tens of thousands of dollars in debt. Even as adults, most people don’t know they are spending well beyond their means until it is too late. It is basic math to realize if your weekly or biweekly salary is less than what you spend you are likely not making it.
A simple budget to track your expenses is a great way to figure out your spending habits. Using a budget to track where and how you are spending your money helps you to stay more conscious of impulsive spending while teaching you to adjust your behaviors. If you spend $6.00 a day at the corner coffee shop, that is $42 a week, and on a bigger scale, almost $2,200 a year. These are what you would consider nominal costs. They are small in the present, but add up over time, and while it’s easy to justify $6.00 a day, is it as easy to justify $2,200 when the holiday season comes around and you can’t afford plane tickets home or even gifts for your family?
One of the strongest indicators of controlled spending and budget monitoring in the Fidelity poll is that not only are people coming out of the recession confident, but they are managing to save money when they likely haveless. While the recession felt like a jab to our sides, it has also taught us how to monitor our wallets and how to spend.
“Credit,” is no longer a bad word.
While the financial crisis taught us how to spend; it also taught us another important tool to add to our financial tool belt. Credit is no longer something we should fear. It is something we should aggressively hold and build. Americans are no longer shying away from their credit. Regular credit monitoring has exploded in the last couple years as nearly every financial institution has a program for protecting your credit. It is almost taboo now if you are not checking credit scores or know what a good credit score range is. Whether you lost almost everything in the financial crisis or came through it unscathed, we all seem to have a goal in mind when it comes to our credit score and how we will attain it. Are you reaching for 650, 700, 750, or 850?
Regardless of what happened the last five years and how concerned we all were, one thing has proven to be true. In a crisis, we all come out stronger and wiser.