By Dolores Kong
The Boston Globe

Americans appear less prepared than ever to weather a
prolonged stint of joblessness or extended economic
slowdown, a stream of recent surveys suggests.

Many families and individuals spent big and saved
little during nearly a decade of prosperity and
skyrocketing stocks.

Now, with the economy slowing, financial specialists
and consumer advocates say millions may have mortgaged
their future.

Savings rates are at near historic lows. Personal debt
is way up. And the market's recent plunge has
shriveled once-robust returns many counted on from
stock portfolios and 401(k) plans.

"Americans are ill-prepared for either a downturn in
the economy or for future events like retirement,"
said Baie Netzer, a certified financial planner and
investments editor for, an online personal
finance site.

A national survey by Quicken, the financial services
company that owns the site, found that only 31 percent
of the nearly 700 people polled had saved enough to
cover three to six months of expenses, a rule of thumb
for emergencies.

And if the nation couldn't save in the good times,
what about the lean times?

"That's the problem right now," said Stephen Brobeck,
executive director of the Consumer Federation of
America. "As the economy slows, more households will
feel the economic pinch."

The federation just released a national survey of more
than 1,600 people showing that 15 percent "always"
live payday to payday, 13 percent said they did so
"most of the time," and 25 percent do so "sometimes."

"So many people don't save," said Cynthia Becker,
regional coordinator of education for Consumer Credit
Counseling Services of Southern New England. "They're
living paycheck to paycheck," buying unnecessary
things and telling themselves they need to do so to
enjoy the moment.

"These momentary thoughts are not going to take care
of retirement or periodic expenses or emergencies,"
Becker said.
A set of sobering statistics and surveys underscores
those conerns:

- The nation's savings rate fell into negative
territory during 2000 for the first time since the
Great Depression. The latest figure from the Commerce
Department's Bureau of Economic Analysis, for January
2001, shows that the savings rate has fallen even
farther, to -1.0 percent.

- The Federal Reserve reports that consumer debt
(including credit cards and consumer loans) was at a
record $1.54 trillion in January 2001.

- Another Fed survey found that the percentage of all
households with a negative net worth increased between
1989 and 1998, from 7.3 percent to 8.0 percent.

While today's slowing economy is a far cry from the
recession of the early 1990s that saw massive layoffs
and real estate foreclosures, savings advocates say
the latest numbers about shrinking net worth and
growing debt raise serious questions about what will
happen if bad times hit hard.

Nelson Lopez, a certified financial counselor and team
leader for Consumer Credit Counseling Services of
Southern New England, said he has seen the financial
consequences of people failing to save.

Lopez said when clients suddenly lose their jobs, they
realize they can't keep up with credit card payments,
rent, and other expenses.

"That creates panic in a person," said Lopez, whose
Boston office provides credit counseling for people
with a broad range of incomes.

But some economists say the savings picture may not be
as gloomy as the statistics suggest.

For instance, if past economic downturns are an
indication, Americans will change their spendthrift
ways as soon as they see the layoffs mounting.

"They start saving once the economy goes into
recession. They feel like they can't go out and buy a
car, they can't go out and buy a new house," said
Larry Moran, senior economist for the US Department of
Commerce's Bureau of Economic Analysis. "They're
afraid they're going to lose their jobs."

But Moran added, "It's not a conscious effort to save.
It's just a conscious effort not to spend."

And even though the US personal savings rate
calculated by the federal government is negative for
the first time since the 1930s, some economists point
out that the rate fails to take into account stock
market wealth - or what's left of it after recent
market drops.

"There's some real problem with the savings rate. It
doesn't include capital gains," said Steven Venti,
professor of economics at Dartmouth College and
research associate at the National Bureau of Economic
Research, the Cambridge-based organization that is the
official tracker of recessions.

While some stock market wealth has disappeared
recently, many people who have been investing
long-term have still seen their 401(k) and other
retirement funds grow substantially, Venti said.

And while he can't say whether Americans are
financially prepared for an economic slowdown, Venti
said, "There clearly are haves and have-nots. I think
the haves are much better prepared than 15 or 20 years
ago. There is still this large group of have-nots."

But Brobeck of the consumer federation disagreed with
economists who question what the US personal savings
rate measures. "You have to understand that most
economists have a macroeconomic point of view," he
said. "Virtually every expert believes the country is
not saving enough."

Even if the savings rate included stocks, the last
year in the markets put a dent in that. "Now the stock
holdings of most households are down, in some cases
considerably so," Brobeck said.

But for unemployed workers and those who may lose
their jobs in the latest round of layoffs, the
situation can be more difficult if they haven't saved.

Of course, some people have prepared. Unlike many of
their peers, for Avrum Mayman of Canton and Todd
Kriensky of Boston's Back Bay, reducing spending and
boosting savings is a way of life.

When the dot-com company that Mayman worked for went
under in December, it was the second time in less than
three years that the MIT management school graduate
had been laid off.

Luckily, he and his wife had been saving money and
living on a budget. They were ready when his
unemployment ran out after he lost a senior management
job in 1998 at a computer disk-making firm, and
they're ready now.

"That really is the lesson - prepare for the worst.
Once you get past that, you don't have to worry about
it anymore," said Mayman, 37, the former director of
business development at, an online
delivery and tracking system for oversized goods that
failed in December. He credits his wife, Angelika, for
being a disciplined saver.

Kriensky, 27, a Web graphic designer who works part
time but is looking for a full-time job, said, "You
feel the money constraints because you're on a fixed
budget. Although I'm getting by, it's kind of a daily
struggle, watching what you're spending on."

Although Kriensky gets some financial assistance from
family, "basically, my expenses are lean," he said.
"It's macaroni and cheese for dinner instead of going
to cafe Ciao Bella."