Survey Finds Americans Unprepared For Recession: Financial Advisors' Daily Digest
By SA Gil Weinreich :
Americans are not ready for the next recession. They're still struggling with the last one. So says a new survey by GOBankingRates .
The financial struggles of average Americans (the survey of 1,007 has a margin of error of 3.1%) has become part of the cultural backdrop of our times, and as such the dreary results won't surprise: About half (49%) are living paycheck to paycheck; 61% have savings insufficient to cover six months of living expenses; 78% are unprepared for a new job search with an updated resume; 64% lack multiple streams of revenue; and 68% say their investment strategy does not account for the possibility of another recession.
To be sure, no one will be pleased with these results, but here are the implications that I find particularly disturbing.
First, recessions occur periodically and the last one ended eight years ago. These are the giddy times of stock market booms, as in the roaring '20s when people are supposed to be flush with money and at least, in theory, have the wherewithal to prepare for the coming lean years. Yet the picture emerging from the data exhibits the disadvantages of both good times and bad times. As in good times past, people are oblivious to the possibility of change and thus have not updated their resumes or given thought to another recession. As in bad times past, they're living paycheck to paycheck and have no reserves.
The GOBankingRates survey breaks down figures by sex and age. I was struck by the wide disparities in the former category. Men appeared to be in much better shape than women (e.g., 41% of men are living paycheck to paycheck vs. 56% of women, and 48% of men can handle six months of living expenses vs. 31% of women). It seems reasonable to surmise that these statistics reflect the marriage crisis we've touched on before. It also accounts for the finding that 64% of survey respondents lack multiple streams of revenue.
In the survey's age breakdown, I was most struck by the paycheck-to-paycheck question, where the 25-34 and 35-44 cohorts did better in relative terms, registering a minority (44% in both groups) experiencing this problem. This made sense: The 18-24 age group are still paying off student loans or working entry-level jobs, whereas those between 45-64 may be presumed to be dealing with the financial challenges of raising families and paying for colleges, weddings and medical expenses. The obvious point is that if you're young, without family responsibilities and earning a paycheck, now is the golden opportunity to start saving for your future!
My biggest disappointment with this survey (though one that hardly surprised) was the finding that the investment strategy of 68% of respondents does not take into account another possible recession. I've written about this often. Recessions happen; setbacks occur. For that reason, one should always be in a position to capture opportunity and shield oneself from risk through a broadly diversified portfolio, including equity, property and liquidity.
We welcome your thoughts in our comments section. Meanwhile, below please find today's financial advisor-related links:
- BlackRock offers investing tips for grads and their parents.
- Columbia Threadneedle Investments offers a fiduciary reform update .
- BlackRock: Keep investment expenses and taxes down.
- Investment Cycle Engine, Inc.: High private debt keeps a lid on economic growth.
For more content geared to FAs, visit the Financial Advisor Center .
See also Goldilocks Principle on seekingalpha.com