A Paycheck Away From Ruin

The results of a bevy of surveys found a growing number of consumers are only a couple paychecks away from a household collapse even as many scramble to shore up savings. Rainy-day funds appear to be a distant memory as households burn cash to cover food and energy bills as well as mortgage and car payments. A large number of households say that even one missed paycheck would spell financial ruin.... [more]

The results of a bevy of surveys found a growing number of consumers are only a couple paychecks away from a household collapse even as many scramble to shore up savings. Rainy-day funds appear to be a distant memory as households burn cash to cover food and energy bills as well as mortgage and car payments. A large number of households say that even one missed paycheck would spell financial ruin. And even in households that remain well off, the surveys show a festering fear that financial problems are lurking. "This is flashing so bright red," said Paul Ballew, senior vice president of Nationwide Insurance Co. "Roughly 60% of the population was ill-prepared (financially) before the meltdown." A MetLife study released last week found that 50% of Americans said they have only a one-month cushion -- roughly two paychecks -- or less before they would be unable to fully meet their financial obligations if they were to lose their jobs. More disturbing is that 28% said they could not make ends meet for longer than two weeks without their jobs. And it's not just low-income earners who would find themselves financially challenged. Twenty-nine percent of those making $100,000 or more a year said they would have trouble paying the bills after more than a month of unemployment. Long-term retrenchment America's Research Group found that nearly 57% of the consumers it polled said they would spend less this year while virtually no one plans to spend more. But this is not just a one-year thing, according to consumers surveyed by BIGresearch. Nearly 91% said they see this crisis bearing down on their spending decisions -- in effect, their lifestyles -- over the next five years. Fifty-five percent said they will think carefully before they make a purchase and 51% said they expect to be more price-conscious when buying clothing and food. "American consumers are hunkered down, bracing for a depression," said Britt Beemer, chief executive of America's Research Group. "The dramatic drops in shopping levels have no match in our database in the last 30 years." This is a secular shift in attitudes, not a cyclical one. Spending is not returning to levels we saw in recent years. I am still expecting 500,000 or more jobs lost in each of the next two months. Some months of 750,000 losses or more are not out of the question This is a worldwide problem UK More Britons joined the jobless rolls than at any time since 1971 as the recession destroyed work in factories, building sites and banks. Canada The February employment decrease pushed the unemployment rate up 0.5 percentage points to 7.7%. Spain Unemployment Might Hit 20% Buying real estate in this environment seems to be idiotic. Taking on a large mortgage to pay for that is a very, very risky bet. It's time to read the NYT from 1929 on. [less]