By Kathryn Roberts, Cox-SABEW Fellow
Six years after the great recession of 2008, unemployment is finally coming down; however, that does not mean that incomes are going up, said economic experts at a recent business journalism workshop in New York City.
“People have prioritized saving but they don’t have a lot of gunpowder to do it,” said Greg McBride, chief analyst at Bankrate.com. “This is mainly because of stagnant incomes and people just trying to keep their head above water.”
In a Bankrate study, 36 percent of consumers said their top financial priority is to stay current on their bills. Consumers want to save more but low and static incomes have made it nearly impossible, according to the data presented at the workshop sponsored by the Society of American Business Editors and Writers.
Despite the continuous credit struggle, people are smarter about spending. Millennials, the generation born between the years 1977 and 1994, are even exhibiting better financial habits than their predecessors. This is mainly due to the burden of student loans that force them to learn the system, according to Michelle Raneri, vice president of Experian.
“Americans are getting more educated about this stuff,” said Michael Schreiber, editor of Credit.com. “The fact that you have millennials that are so risk-averse in terms of credit is maybe a telling sign that they know something’s up.”
More economic battles are still to come due to the deferred effects of some government loan modifications, such as H.A.M.P. — Home Affordable Modification Program. Put into effect in 2010, the program lowered monthly interest rates of home owners’ mortgages.
However, the modification only lasts five years, which means many consumers will see their interest rate go up one percentage point every month starting in 2015, creating further strain on their already tight budget.
“If they plan for it, people can take some proactive steps,” McBride said, “but what makes it worse is people don’t know it is coming.”