The impending fiscal cliff was big news in December, and was named the primary scapegoat for Americans’ financial insecurities. Indeed, these claims were exacerbated when holiday spending fell to an unexpected rate.
According to a recent Bankrate.com survey, 28 percent of consumers spent less money than they expected during the holidays. In addition, the company’s Financial Security Index reads at 98.6 in January, with scores below 100 indicating lower levels of financial security than the previous year. The index has been below 100 in 24 of the 26 months since its inception in December 2010, Bankrate notes.These scenarios may indicate that the fiscal cliff – which was resolved by the deadline – was not the only source of Americans’ discomfort and anxiety about their personal finances.The study shows that Americans stress about their existing loan and credit card debt levels has remained unchained from last year, and more than one-third of respondents reported being less comfortable with their savings now compared to the last 12 months. This was the case across all income brackets.
“These results illustrate that the fiscal cliff was hardly the only headwind impacting the U.S. economy,” said Greg McBride, Bankrate.com’s senior financial analyst. “Yes, the resolution brought some temporary relief, but the economy continues to plod along in first gear. It’s going to take sustained, substantive job growth in order for Americans to feel considerably better about their financial security.”
Making changes to boost confidence
Moving forward without a budgeting plan or financial goals may contribute to higher levels of stress. Knowing how much a person can spend and how much they are saving can be a liberating feeling, and help individuals work toward their short and long-term financial aspirations. Consulting a professional is a good step people can take if they are unsure how to better manage their finances. An advisor or credit counselor can go through a person’s finances, bills, spending patterns and debt with individuals or couples to help them formulate a customized budget that corresponds with their circumstances and needs.
In addition, making small changes to spending habits can go a long way in improving a person’s sense of financial security. For example, switching to more affordable utility providers, cutting back significantly on eating out and discretionary purchases and downsizing can make a large difference in individuals’ remaining monthly income, and help them stretch their paychecks further.