The economic situation in the United States today continues to be one of the most important issues facing the country. The Federal Reserve has conceded that the labor market is worse than in any recession, the unemployment rate remains high and public and private debt are at record levels.
According to a survey by Money Magazine, close to two-thirds (64 percent) of households with incomes less than $100,000 are worried about their personal financial situation, while nearly half (49 percent) of households with higher incomes are also concerned about their family’s monetary security.
More than half (55 percent) of pre-$100,000 households are living paycheck to paycheck, while 37 percent of over $100,000 households are just getting by. In fact, it seems the wealthy can’t even handle a financial emergency: 38 percent say they wouldn’t be able to pay off an unexpected expense of $10,000, compared to 66 percent of households earning under $100,000.
Furthermore, approximately one-third of triple-digit income households could not live their current lifestyle for three months if the primary income earner were to lose his or her job. This figure is slightly less than the 47 percent of the households with smaller incomes.
“If you don’t believe that your environment will persist, you’re not willing to stake out plans,” Tyler Cowen, a George Mason University economics professor, told the news outlet. “For example, you won’t buy a home based on the premise that in five years you’ll be earning more money. The volatility of the stock market and the government shutdown have only made it harder.”
This isn’t the first study to indicate financial pressures of various income demographics.
Last month, economists Greg Kaplan and Justin Weidner of Princeton University and Giovanni Violante of New York University, published a paper (PDF) entitled “The Wealthy Hand-to-Mouth.” It discovered that approximately 38 million American households are living paycheck to paycheck. The research found that the affluent hand-to-mouth households had at least $50,000 in illiquid assets, such as homes, vehicles and retirement accounts. The issue with this is that they are inaccessible when a financial emergency transpires.
“The wealthy ‘hand-to-mouth’ are households who hold little or no liquid wealth (cash, checking and savings accounts), despite owning sizable amounts of illiquid assets,” the paper stated. “The high costs of college and other bills that stretch a family’s paycheck thin are some of the causes of being stuck in a paycheck to paycheck situation.”
Earlier this year, the Corporation for Enterprise Development (CFED) published a study that highlighted 44 percent of Americans are living paycheck to paycheck and maintain less than three months’ worth of emergency savings.
In addition to a paucity of savings – the national savings rate is just over four percent, according to the Bureau of Economic Analysis – the country is enormously indebted. The federal government faces a near $17 trillion debt as well as nearly $200 trillion in unfunded liabilities and expenditures. The citizenry also has trillions of dollars worth of debt.
Total personal debt is nearly $16.5 trillion: mortgage debt is more than $13 trillion, student loan debt has exceeded $1 trillion and credit card debt has reached $855 billion.
This is economic data that certainly does not renew confidence in either the state or the consumer.
