About 1 in 3 consumers resolved to reduce their debt in 2009, based on New Year’s resolutions outlined in a new poll from CreditCards.com. Still, Americans are more committed to spending time with family and losing weight than erasing their debt.
The “Holiday Spending and Debt” telephone poll, conducted by GfK Roper Public Affairs and Media, showed that 29 percent of consumers pledged to cut their debt load this year. It wasn’t the most common response, however — more than four in 10 (44 percent) respondents resolved to spend more time with family. Three in 10 (34 percent) respondents said they intend to shed extra pounds this year. Debt was a greater concern than kicking smoking, though, with just 10 percent of consumers resolving to quit in 2009.
“It is not surprising, but it is telling, that cutting debt is not so high on the list,” says Jos\xe9 A. Garc\xeda, a senior researcher with the national nonpartisan public policy research group Demos. Garcia suggests that with consumers already doing all they can to improve their financial situations, further changes to income and saving may be out of their control. “Cutting debt at this moment in time, during a recession, is very far from what people think is doable,” he says. Instead, he suggests, as job security vanishes, increasing time spent with loved ones and losing weight may seem more possible. “They are dealing in things that are more able to control,” he says.
When the poll numbers are adjusted to only include those respondents who made resolutions, the number of consumers pledging to reduce their debt increased to a more substantial 44 percent, although other concerns still took priority. The scientific poll, conducted Jan. 9-11, 2009, by the research firm GfK Roper Public Affairs & Media on behalf of CreditCards.com, included interviews with a representative sample of 1,005 adults. (See poll methodology.)
|Have you made any of the following resolutions for the new year?|
Limited options this year
The impact of the troubled economy is clearly evident to one credit counseling group. “Our call volume is higher than it’s ever been, and some of the ways we were able to help people before aren’t available to a lot of people” anymore, says Sandy Shore, senior counselor with New Jersey-based consumer credit counseling agency Novadebt. She says that people can no longer sell their expensive homes or apply year-end bonuses or raises toward existing debt.
Adding another source of income has also become problematic. Shore acknowledges that picking up extra part-time employment or getting a nonworking spouse into the job force may not be possible at this time. “Now those jobs that they normally would have gotten — like retail jobs or office temp jobs — those jobs just aren’t available because people are cutting staff,” she says. Amid this environment of uncertainty, “they see how hard it is to actually cut any kind of debt,” Garcia says. He points to the fact that workers are already putting in long hours. “They already have been working that much for the longest time, so it’s not going to make a dent,” he says.
‘On a mission’ to escape debt
Still, some consumers are determined to improve their finances this year. Regina Florian, a senior benefits administrator from outside Philadelphia, made reducing debt her sole resolution for 2009. “I am on a mission this year to clean everything up,” she says.
“It’s not a life-or-death situation, but it’s something I would really like done this year,” Florian says. She says that both she and her husband brought some debt baggage from prior divorces to their current marriage. “He and I had a couple of crappy years, so I decided this year is going to be better,” she says. After what she refers to as a “meeting of the minds” with her husband, Florian says she decided that positive thinking about tackling her debt situation was a good way to start 2009.
Middle class most likely to seek debt decrease
Middle-income consumers were the most likely to commit to cutting debt. Forty-eight percent of consumers with a household income of $30,000 to $39,900 resolved to cut their debt. “That’s huge,” says Bruce Cundiff, director of payments research and consulting with Javelin Strategy & Research. “You’ve got essentially half that say they want to cut debt.”
Their resolve may stem from how much they are suffering. “It might be an indication that the financial crisis, and the economy, is taking more of a toll on that income group,” Cundiff says. Dennis Moroney, senior bank card analyst with TowerGroup, agrees, saying these workers are both fearful of and actually experiencing layoffs.
Fewer upper-income consumers — those in households earning $50,000 a year and higher — said they resolved to decrease their debt. Novadebt’s Shore says that with a wide swath of people finding themselves in financial trouble, more wealthy consumers may be doing themselves a disservice. When it comes to debt, “maybe people don’t worry about it until they’ve lost their job, and people in the higher income bracket aren’t as concerned about that,” Shore says.
Debt worries common among middle-aged
The ages of those polled also played into their resolutions. Consumers aged 35 to 49 years old were more likely to say they both intend to cut debt and spend more time with their families this year compared to older consumers. For those of middle age, “these people have been losing their 401(k)s left and right,” Garcia says.
Consumers aged 18 to 24 are less concerned with mounting debt levels. Novadebt’s Shore says this age bracket may be willing to wait. In the case of students saddled with debt, they could be thinking, “I’ll get a great job when I graduate and pay it off,” Shore says. It’s only later, when they are living on their own, that they become fully aware of life’s expenses. At that point, “mom and dad aren’t paying for the cable bill anymore,” Shore says.
Both middle-aged and younger consumers tended to say they plan to spend more time with family this year, compared to their more senior counterparts. Moroney chalks this up to the emotional support family can provide in tough times. “I’m more inclined to think the family creates a secure, comfortable environment,” he says. That resolution also lines up well with plans to spend less, such as committing to eating at home rather than going out to restaurants, Moroney says. For young people who lose their jobs, the decision to spend time with family may be one of necessity. “They have nowhere to go, so they go home,” Moroney says.
Older consumers may have simply given up on debt reduction. “Older people — 65 and older — maybe it’s less likely they can do something about it,” Shore says. In fact, that group is the least likely to make resolutions of any kind. “I guess at that age you become realistic in terms of what you have set out for the new year,” Moroney says.
Women’s commitment to both cutting debt and shedding weight outpaced that of men. “While both men and women are likely to make resolutions for the new year, women are much more likely to list ‘cut debt’ as a resolution,” says Michael Rubin, author of “Beyond Paycheck to Paycheck.” “Despite women’s greater interest in cutting debt, ‘losing weight’ is still listed more frequently and by an even greater margin over their male counterparts,” Rubin says.
Why are women more determined to slash debt? That may stem from greater hands-on involvement with household finances, such as bills and budgeting, says Moroney. In general, “Women tend to be more practical,” Moroney says.
Smokers a shrinking group, but have opportunity for savings
The resolution to quit smoking may be the last on the list for a simple reason. “I’m sure a decent number [of respondents] aren’t smokers anyway,” says Cundiff. That contrasts with the universal qualities of the other categories. “Most have some debt on their books. Mostly everybody could stand to lose a couple pounds, and we’re all concerned about spending time with our families,” he says, adding that not everyone smokes.
As for giving up cigarettes, “It’s resonating with a smaller and smaller number of people,” Cundiff says.
Still, those remaining smokers may find that cutting out tobacco could amount to significant savings. Debt counselor Shore says her organization encourages people to give up smoking as a way to improve their finances. By multiplying the cost of a pack of cigarettes by the number of packs, “When you figure it out on a monthly basis, that’s hundreds of dollars,” she says. “We have some people that are spending more on cigarettes than they are on rent.”
The survey was conducted from Jan. 9-11, 2009, by GfK Roper Public Affairs & Media on behalf of CreditCards.com, via random digit dialing phone interviews with 1,005 interview subjects. Interviewees were approximately split between males and females ages 18 and over, with 525 females and 480 males surveyed. The raw data were then weighted by a custom-designed computer program that automatically developed a weighting factor for each respondent, employing five variables: age, sex, education, race and geographic region.
The total margin of error on weighted data for the full sample is plus or minus 3 percentage points at the 95 percent confidence level.