Women are more concerned than men and have been more likely to cut spending; December issue offers advice on how to ride out the financial storm
YONKERS, NY —
Consumer Reports’ latest national survey finds
Americans' financial concerns
continue to grow. Almost one-third (32%) of respondents, nearly double the amount of the previous year, said they are worse off today than a year ago.
Among the respondents biggest fears were not having enough money to retire, paying for college and healthcare, and the value of their savings and homes. Seventy-two percent of respondents said they were worried about being able to retire when they wanted to or even having enough to retire. Fifty-five percent of respondents said they were concerned about the safety of their bank accounts and 60 percent were worried about the drop in their home value.
Saving for college was also a major concern. Sixty-eight percent of respondents indicated they were worried about being able to pay for their child’s college education. Another concern as some credit card companies reduce their limits or change their terms, 35 percent of respondents are worried about their ability to pay off their existing credit card debt.
“The results show people are still very nervous and confused about what to do next. We took a look at many of the major personal money concerns and developed strategies to help people ride out the storm,” said Noreen Perrotta,
Consumer Reports money editor.
The
Consumer Reports National Research center calculated results based on a nationally representative telephone survey of 1004 adults, during the initial weeks of October 2008.
The results also showed the belt tightening over the past year: 56 percent or respondents indicated that they cut back on entertainment and eating out, 53 percent reduced credit card spending, and 50 percent planned to cut down on holiday spending.
Women were more concerned about personal finance issues than men and were more likely to have curbed spending habits in several areas including: spending less on entertainment and eating out, reducing credit card spending, postponing home improvement projects, and putting off big purchases for the home.
However, the largest gap between women and men in their efforts to cut spending was on holiday spending. Sixty-three percent of women planned to curb holiday spending compared to 36 percent of men who responded.
To help consumers get through these uncertain times, the editors of
Consumer Reports have looked at some of the more tough questions people are asking, and offered strategies to weather the financial storm with concerns about homes, savings, credit, retirement, college saving and more. Here are some of the highlights:
Home Ownership Concerns:
I want to buy a home soon. How difficult will it be to get a mortgage? A lot tougher than it used to be. Two years ago, you could buy a home without proof of income or a penny down. Now you’ll probably have to submit W-2s and tax returns, and make a down payment of 20 or even 30 percent. You won’t qualify if your mortgage payments would exceed 43 percent of your monthly pre-tax pay; in the boom, payments were allowed to be as high as 55 percent.
CR's advice: If your credit score is below 720, try to boost it by paying down other debt and correcting any errors on your credit reports. Save for a bigger down payment. Include some local banks in your search for the best terms; they have been less affected by the mortgage meltdown.
Credit Concerns:
My credit card’s limit has been lowered. How will that affect me? Aside from the fact that you won’t be able to borrow as much on your card, a lowered credit limit could result in added fees if you make a purchase that puts you over that amount. Your credit score could also be negatively affected, since your ratio of debt to available credit will go up.
CR's advice: If you carry a balance on your credit card, don’t let it run higher than 30 percent of your limit. Open all mail from your card company to stay on top of account changes. If your credit limit has been reduced or your interest rate raised, ask your card issuer for a waiver. You might need to go beyond customer service and speak with a manager.
Retirement Concerns:
My 401(k) is way down. What can I do to rebuild my retirement savings? If you’re at least five years from retirement, there’s probably time for your investments to right themselves.
CR's advice: Resist the urge to take money out of your 401(k) or to stop making contributions to it. Research by the
Consumer Reports Money Lab has shown that dollar-cost averaging—investing at given intervals—pays off well in times of crisis. Check whether the wild market swings have thrown off your asset allocation—the specific mix of stocks and bonds that make sense for your financial goals and risk tolerance. If so, rebalance it by selling shares in assets that are overweighted and buying those that are below optimal levels. Focus on low-cost investments. In good times and bad, high fees and trading commissions whittle away at your money. Index mutual funds typically have lower expenses than actively managed ones.
For more survey results and the complete report with more answers to tough economy questions and
Consumer Reports expert advice on strategies to weather the storm, check out the December issue of
Consumer Reports on sale November 4 or visit
www.ConsumerReports.org.
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The
Consumer Reports National Research Center calculated results were based from a telephone survey of a nationally representative probability of 1,004 adults, 18 years or older in the month of October 2008. The margin of error is +/- 3% among a 95% confidence level.
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