Does Your City Make You Broke?
| June 24, 2009 | Posted by Roshawn Watson under Uncategorized |
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Just as Goldman Sachs predicted, this year the US savings rate has increased to 5-10% for the first time since 1995. Presently, we’re saving on average 5.7% of our income, representing a meteoric rise compared to the negative savings rates we had just two years prior. It is incredible the difference a year can make. Just as the economic downturn has not affected everyone to the same magnitude, we are also we are also not saving at the same rate across the country.
Does your city decide whether you are a spender or saver?
The results of a recent study suggest that one’s city may influence his or her spending habits. Perhaps even more interesting is fact that the results of the study are somewhat counter intuitive. For example, Detroit has taken such a beating with the real estate market being in the toilet and thousands of people losing their jobs due to demolished industries, yet the average person in Detroit spends more than the much more moneyed Birmingham, Alabama.
Fascinating New Study
The two companies that performed the research project are data and analytics firm Acxiom and market research firm BIG Research. BIG Research gather the data on shopping and saving habits via monthly surveys, and then Acxiom used their 128 million household database and algorithms to determine what people are likely to do with their money.
They found that cities that tended to spend proportionately more were Denver, Washington San Francisco, Seattle, San Diego, Austin, Salt Lake City, Cincinnati, Norfolk and Jacksonville. Cities that tended to spend less include Fresno, Nashville, Tampa, St. Louis, Indianapolis, Little Rock, Knoxville, Tulsa, Pittsburgh and Mobile.
No Homogeneous Area
Of course, Acxiom cautions that there is no such thing as a homogeneous customer or city, which is definitely true. Just as there are some real estate and employment markets that have suffered significantly more than others, there are some areas that are significantly more thrifty than others, and these results cannot always be explained by looking at median income as the Detroit-Birmingham example illustrates. Additionally, we have previously described how the economy has impacted wealthy zip codes and wealthy retail shops too. Indeed in some areas, very few want to be associated with conspicuous displays of wealth and status (read luxury goods have become the new porn).
Additionally, I hope that some of this new-found frugality will last. Although no really knows whether this recession induced thriftiness will last, at least some experts agree that this could be a culture-defining recession. In other words, the financial reset button has been pushed, and the America about to emerge may be decidedly more frugal. Indeed, the knee-jerk reaction of abrupt cessation of spending, lending, and borrowing precipitated this recession and wave of unemployment. Of course I am glad that this downturn will likely be temporal as some recent indicators suggest, I also hope that the paradigm shift pertaining to money remains. The new wave of thriftiness remains. Interestingly, there were definitely signs of many embracing frugality BEFORE September. Not surprising at all, there are still some who refuse to cut back. Particularly, it’s middle-income urban families who care more about protecting the quality of their lifestyle. Whilst there is definitely nothing wrong with continuing your same spending habits to maintain quality of life if your spending, saving and investments distribution was appropriate for your income, I hope that this refusal to cut back doesn’t represent the same financial immaturity that contributed to (not solely caused) this downturn in the first place.
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