Nearly One-Third of Americans Plan to Spend Less This Holiday Season;
Americans Show Signs of Financial Discipline in the New Year
economic conditions and fear of a looming recession are weighing on the minds of
Americans as they descend on shopping malls and online shopping sites this
holiday season. The majority of American workers (71%) and retirees (72%) said
they believe that the economy has fallen into a recession or fear that it is
headed in that direction, according to the latest Principal Financial Well-Being
IndexSM. More than one-third of workers (37%) expressed concern about
their own job security, up significantly from second quarter this year, when
only 22% of workers expressed concern.
According to the survey, if an economic slowdown forced workers and retirees
to reduce their spending, more than three-fourths of workers (76%) and 49% of
retirees say they would eat out less often. Both groups said they would cut back
on buying clothing and consumer goods (69% of workers and 49% of retirees).
Almost two-thirds of workers (63%) and more than one-third of retirees (39%) say
they would cut back on entertainment to reduce spending, such as going to movies
and concerts. Americans even indicated they would go as far as reducing their
coffee intake—more than one-fourth of workers (27%) said they would purchase
coffee less often. Finally, 11% of workers indicated they would lower their
retirement plan contribution rate.
"Uncertainty about the direction of the economy clearly is top of mind as
Americans navigate the holiday shopping season, which has turned into a gift
giving extravaganza," said Dan Houston, executive vice president of Retirement
and Investor Services, The Principal. "Americans are underestimating their real
spending. To get on solid financial footing, I recommend that every person set a
budget, prioritize gift purchases and use a high degree of fiscal
Spending for the Holidays
Americans are planning to
tighten their financial belts when it comes to spending during the holidays.
When asked about their intentions for spending this holiday season, 29% of
workers and retirees indicated they plan to spend less money than last year.
More than half of workers (59%) and nearly two-thirds of retirees (64%) plan to
spend the same amount as last year while 12% of workers and 7% of retirees plan
to spend more money. According to the survey, nearly half of workers and
retirees (49% and 46%, respectively) are planning to spend between $101 and $500
throughout the holiday season. Just more than one-fourth of workers (27%) and
less than one-fourth of retirees (22%) plan to spend between $501 and $1,000
this holiday season.
Stepping Into the New Year—Financial Resolutions
Americans were given a list of potential financial resolutions they intend
to make as New Year’s resolutions in 2008. The top two resolutions selected by
workers were paying off credit card debt (40%), followed by putting a set amount
of money into savings each month (39%). Compared with fourth quarter 2006,
significantly more workers are making resolutions to save more each month (39%,
up 6 percentage points from 2006) and to stop using their credit cards (22%, up
4 percentage points from 2006). Less than one-fourth of workers (23%) indicated
they do not intend to make a resolution, and nearly half of retirees (49%) have
no such plans.
"There still may be a financial hangover from last year’s holiday season,"
Houston said. "American workers need to put retirement savings before buying the
next plasma TV or cashmere sweater."
Too Much Plastic?
The index also reveals that more than
one-third of workers (39%) report having credit card debt between $1 and $5,000
compared to just 21% of retirees. While retirees have significantly more credit
cards in their name for personal use than do workers, significantly more
retirees than workers report having no credit card debt (66% versus 33%). More
than one-third (34%) of retirees and 29% of workers reported they have five or
more cards. However, when asked how many of these cards they use on a regular
basis, only 5% of retirees and 2% of workers reported using five or more cards
regularly. On average, retirees report having 4.4 credit cards in their name for
personal use compared with workers (3.7).
Know Your Credit Score?
At least six out of 10 workers
(66%) and retirees (62%) have ordered a credit report in the past. However, more
than half of workers (51%) and six out of 10 retirees (61%) do not know their
credit score, despite the fact that Americans can request a free annual credit
Source: The Principal Financial Group®