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Across economic spectrum, money worries are growing

Well-off Americans are starting to feel a pinch, a survey finds.

May 15, 2008|Abigail Goldman | Times Staff Writer

Donald Fleckenstein lives comfortably in retirement, but higher food and energy costs still prompted him to trade down from a big American car to a small Honda, to cancel plans for a European vacation and to worry more about how the next generations of his family will fare.

"I am not protected or immune to the economic situation in the world, regardless of how much money I make," said Fleckenstein, 81, of Westport, Conn. "There are things that we would like to do or planned to do that we are not."

Across the country, Americans struggling with rising food and energy costs are more worried about their personal finances than at any time since the early 1990s, according to the latest Los Angeles Times/Bloomberg poll.

Nearly 2 out of 5 people say the state of their personal finances is fairly shaky or very shaky, the poll found. And for the first time since 1993, the percentage of people who said their finances were very or fairly secure fell below 60% -- to 57%, said Times Poll Director Susan Pinkus. "Anything below 60% is sort of like a warning sign of what's coming next," Pinkus said. "It paints the picture of a very grim, weakened economy that is affecting how people are going to spend."

More than three-quarters of those polled said they thought the economy had fallen into a recession and that the country was "seriously off on the wrong track."

Half of those polled said 2008 would be a below-average year for the stock market, and 56% of registered voters said the economy should be the top priority for the presidential campaign -- a shift from December, when the majority said Iraq should be the candidates' focus.

Money worries plague Americans across the financial spectrum. Of those making between $60,000 and $100,000 a year, 26% described their finances as shaky; 10% of those making more than $100,000, including Fleckenstein, used the same terminology.

"I just bought gasoline at $3.96, and milk is about off the chart," Fleckenstein said in a follow-up interview after participating in the poll, in which he indicated that he had income of more than $100,000 a year. Even so, "It isn't easy today," he said.

The poll also found a sharp ethnic disparity in how Americans view their finances. Although 61% of whites and 54% of other ethnic groups polled said their personal economic situation was secure, just 39% of African Americans described their finances in positive terms.

More than half of African Americans polled, 53%, said their finances were shaky; 34% of whites and 42% of other ethnic groups polled expressed similar concerns.

The Times/Bloomberg poll, based on telephone interviews May 1 through May 8 with 2,208 adults nationwide, has a margin of sampling error of plus or minus 3 percentage points.

Part of many Americans' worries is their increasing debt.

Two out of five Americans who have credit card debt said it was more than it was five years ago -- with 22% saying they owed "much more" on their cards.

Ten percent of credit card holders said they owed more than $7,000 on their cards, and 11% said they owed more than $10,000.

Many of those surveyed do not anticipate their debt load growing lighter in the year ahead. Altogether, 15% of respondents said they expected to have more debt in the coming year, and nearly 1 in 10 Americans said they also expected to have lower assets.

Chris Kobes, 41, who lives in Cloquet, Minn., near Duluth, was among those who told pollsters that he had worries about the economy and his own finances.

With earnings of less than $40,000 a year, Kobes said he just barely makes it from paycheck to paycheck -- and that's after cutting back on things such as eating out, going to movies and driving unnecessary distances.

"I do very little extra that isn't a necessity," Kobes said. "With the cost of gas and food being more, there's just less money left over."

Affluent Americans also have a gloomier perspective. In a Bloomberg poll taken a year ago, nearly two-thirds of investors making more than $100,000 a year said they expected to have lower debt and higher assets in the year ahead. This time around, just 49% of that group held such a rosy outlook.

In general, Americans are planning to increase savings or curtail spending. Thirty-two percent predicted that they would have less debt and more assets in the coming year; 11% anticipated lower debt -- but also lower assets.

Still, for better or worse, fewer Americans are planning to tighten their belts than during the economic downturn of the early 1990s. In a 1991 Times poll, nearly half said they would use their credit cards less. In the most recent poll, 43% of Americans anticipated less debt in the coming year.

As might be expected given the current housing slump, Americans are skeptical that the housing crisis will be over soon.

Just slightly more than half of homeowners polled said they thought their homes would appreciate in value over the next three years. In a poll taken 14 months ago, 83% expected to see gains in the value of their homes.

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