Despite official pronouncements of the end of the recession, many Americans continue to question whether the economic turmoil is really over.
Families are understandably troubled by the persistence of a lackluster job market, depressed home values and battered retirement accounts. Our ongoing surveys through the First Command Financial Behaviors Index® reveal that half of middle-class people believe we have skipped over the recovery phase entirely and moved into a second downturn, the so-called “double-dip” recession we’ve been reading about for the past several months. And half of those people – a quarter of middle-income Americans – say they expect to see the boom-and-bust cycle continue with a triple-dip recession.
Obviously these are trying times for many Americans. While it is possible that financial uncertainty could be with us for an extended period of time, I am not convinced that we are approaching a second downturn. After all, double-dip recessions are rare. The last one was almost 30 years ago. Perhaps one reason it feels like we’re going through a second downturn is that our economy has not yet returned to health.
We still remember the booming economy of our recent past, an economy that was much admired by the rest of the world. But you can’t say it was always a healthy economy. Built on the unstable soil of rampant consumerism, our economic success came at the price of positive financial habits like saving money and cutting debt.
Now the longest economic downturn since the Great Depression appears poised to pay a valuable dividend in the form of a New Frugality. Middle-class families are increasing their use of coupons, reducing travel, buying generic goods and shopping at discount stores. By reducing spending, they are freeing up dollars to put toward cutting debt and increasing savings.
Americans are saving their way to a better lifestyle, one that emphasizes the importance of physical health and family bonds. The majority of middle-class Americans claim they are healthier today thanks to frugal behaviors such as cooking at home more often, spending less on junk food, bicycling or walking to work and reducing alcohol purchases. The New Frugality also honors the value of spending time with family. This Thanksgiving one in five middle-class families say they will cut back by dining with immediate family only, and about the same number of families plan to cut back by staying closer to home.
Continuing economic concerns are actually helping to strengthen these newly-embraced behaviors. People who think we are in a second downturn have been more likely to cut spending than those who do not think we are sliding back into recession. Almost three quarters of these consumers say they are striving to be even more frugal in their spending habits.
Reducing expenses, increasing savings, spending more time with family– this is the right kind of recovery. By embracing frugal living, middle-class Americans are preparing to successfully weather a continuing downturn as well as make the most of future prosperity. First Command is ready to help. Your Financial Advisor is committed to helping you plan confidently to pursue your financial goals and dreams. We’re here to guide you through markets good and bad, today and for the rest of your life. If it’s been a while since your last review, give us a call.
About the First Command Financial Behaviors Index®
Compiled by Sentient Decision Science, LLC, the First Command Financial Behaviors Index® assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 3.1 percent with a 95 percent level of confidence. www.firstcommand.com/research
About Sentient Decision Science, LLC
Sentient Decision Science was commissioned by First Command to compile the Financial Behaviors Index®. Sentient is a full-service market research firm with special vertical expertise within the financial services industry. Sentient specializes in advanced research design and statistical analysis of behavioral and attitudinal data.
About First Command
First Command Financial Services and its subsidiaries, including First Command Bank and First Command Financial Planning, assist American families in their efforts to build wealth, reduce debt and pursue their lifetime financial goals and dreams—focusing on consumer behavior as the first and most powerful determinant of results. Through personalized financial plans that emphasize accumulating wealth while reducing risk, First Command Financial Advisors have established lasting relationships with hundreds of thousands of client families since 1958.
First Command Financial Services, Inc. is the parent company of First Command Financial Planning, Inc. (Member SIPC, FINRA) and First Command Bank (Member FDIC). Financial planning services and investment products, including securities products are offered by First Command Financial Planning, Inc. Insurance products and services are offered by First Command Financial Services, Inc. Banking products and services are offered by First Command Bank. Securities products are not FDIC insured, have no bank guarantee and may lose value. In certain states, First Command Financial Services, Inc. is a separately registered domestic corporation and does business in California as “First Command Insurance Services.” A financial plan, by itself, cannot assure that retirement or other financial goals will be met.