Financial security of most Americans on the decline

The Financial Security Index of American consumers is lower than it was last year. Image: kenteegardin/Flickr/CC BY-SA

According to a new report by BankRate.com, American financial security has slipped to its lowest level since March. In spite of that, most Americans still are not tracking spending and sticking to a budget.

Financial Security Index down in all areas

BankRate.com’s Financial Security Index, released July 25, showed not only its lowest rate since March, it was also the largest year-over-year decline since August of last year. The U.S. economy maybe or may not be growing at a nearly imperceptible rate. However, it has not grown enough to make consumers feel any more off than they were a year ago.

BankRate.com compiled its report from the responses of about 1,000 adult consumers polled by telephone in early July. The index showed declines in all five of the key areas it tracks: job security, amount of savings, amount of debt, net worth and overall financial picture.

Job security

Of those polled across the nation, the least decline was seen in job security. That is in spite of the unemployment rate continuing to hover at more than eight percent.

Bankrate.com’s senior financial analyst, Greg McBride, said:

“Interestingly, despite another poor jobs report in early July, feelings of job security were the least affected and remain the component of financial security that Americans feel is most improved relative to one year ago. Just 19 percent of Americans feel less job security than one year ago.”

Savings

Only 16 percent of the American consumers surveyed said they felt better about their savings than they did one year ago. Nearly 40 percent, however, said they were less secure about their savings than they were last summer.

Debt

American consumers are feeling more overwhelmed by their debt. Nearly a quarter of those polled — 24 percent — expressed increased discomfort with their level of debt. That is up from 18 percent in June.

Overall financial security

Nearly a quarter of consumers said they were feeling more comfortable about their total financial picture than in 2011. However, slightly more — 28 percent — felt their overall fiances had declined.

The study concludes that the lack of wage growth is one of the largest factors preventing people from paying down debt, accruing savings and moving ahead.

McBride wrote:

“What’s really undermining consumer progress on financial security are stagnant wages. If incomes aren’t growing it’s difficult for people to make headway on debt and savings.”

Finances 101

But the economy, which McBride expressed as “stuck in first gear,” is not the only culprit in declining financial security. Much of the trouble, says McBride, could be helped with basic budgeting and expense tracking within each household:

“For a nation where just 1 in 4 households has an adequate emergency savings cushion, the fact that only 60 percent adhere to a fundamental behavior such as tracking expenses reveals a key weakness.”