Families relying on more money smarts to get by

Written by DAVE CARPENTER AP Personal Finance Writer

 

CHICAGO --Americans have been forced to take a crash course in money management, and class is still in session.

Falling home prices and rampant foreclosures. Flat wages and high unemployment. Volatile stocks and no safe refuge for savings. An unforgiving recession and the threat of a sequel.
One economic challenge after another has tested the financial strength of most everyone in recent years, and more hurdles loom ahead as signs of an economic slowdown mount.
Although results are mixed, many families have shown they are up to the task. By necessity, they've toughened up and become more disciplined about their finances. They're saving more, paying down debt and charging less on their credit cards.
For the fourth straight year, on average, individuals are saving more than 5 percent of their after-tax income. Back in 2007, they were setting aside less than half that Ñ and some nothing at all.
Such changes in behavior may not be permanent. But they're a noteworthy development following years when so many overspent, overborrowed and were neglectful if not downright oblivious about basic finances.
"Each succeeding generation since the Depression has gotten further and further away from financial discipline," says financial planner Mark Balasa. "Some (people) are getting religion now Ñ having it forced upon them."
Indeed, Balasa says his clients at Itasca, Ill.-based Balasa Dinverno Foltz, which manages about $1 billion in assets, are focusing more than ever on controlling spending, savings and tax liabilities.
But like so many others, they're also hoping for some improvement in the economy so they can fully apply their lessons and get a chance to flourish.
It won't be easy. Couples, families and single people are all facing disheartening trends. Among them:
-- Median household income has fallen for three straight years, declining 6.4 percent from $52,823 in 2007 to $49,445 in 2010.
--The portion of households living in poverty grew to 15.1 percent last year, encompassing a record 46.2 million people. For a family of four, that meant income of less than $22,314.

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