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On finances, many Americans are no better than the government


Various polls and surveys make it clear that Americans are greatly concerned about the size of the national debt. We wonder if there is equal concern over personal finance, and if people are adequately addressing their own levels of indebtedness and, most importantly, how much they are saving for the future.

Research shows relatively few people are likely financially prepared for retirement, and that goes for people of all ages. And new research shows a large number of Americans are living paycheck to paycheck, and that goes for people of all income levels.

It adds up to a perplexing disconnect between what people believe is the right thing to do and their willingness to do it. Financial responsibility on a national level means prudent management of the nation’s revenues and expenses. On a household level, it means exactly the same thing regarding personal revenues and expenses.

On both levels, the numbers are startling. The federal debt stands at more than $17 trillion. Among all households where at least one person is employed full time, less than a third have savings that equal one year’s income. More than half of all working households — 57 percent — have less than $25,000 in total savings, not including home equity, according to the non-profit Employee Benefit Research Institute’s 2013 Retirement Confidence Survey.

And the number of people are actively saving money is down 9 percent since 2009. The 2008 recession is a primary influence. Many Americans say they have less income and saving for the future is harder to do. Some say they have lost confidence in the stock market and are therefore investing less. But that isn’t the whole story.

A study released this month by the Brookings Institute shows that the number of people regularly spending every dollar they earn has grown significantly in recent years, especially among those in higher income categories. According to economists from Princeton and New York universities, 38 million American households have virtually no liquid savings to draw upon after their monthly pay is spent. And two-thirds of those households have incomes of at least $50,000 a year. While many have money invested in retirement accounts and in home equity, they are nevertheless ill prepared for the proverbial rainy day.

The implications are far-reaching. For one, lack of preparedness for retirement means more people will rely on national entitlement programs, which already are under stress. The convergence of fiscal unfitness on both governmental and household levels speaks to a troubling future, and one that is not many years off.

Economists say people tend to spend money based on their current lifestyle expectations, and low savings rates reflect unwillingness, for whatever reason, to look far beyond the present moment. But financial responsibility requires a clear vision on how future expectations might be met.

On both a governmental and individual level, current trends suggest such clarity is presently in short supply. Both trends bode ill for the future.