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Gallup’s annual “Mood of the Nation” poll sampled 1,018 adults from across the United States earlier this year, and the results show that more Americans say they are worse off financially right now than they were a year ago. 42 percent of the respondents consider themselves to be worse off, 35 percent say they are better off, and 22 percent claim to be in the same financial position.

This sentiment is surprising considering the economy has been continuing to improve and the stock market (measured by the Dow Jones Industrial Average) was up 26.5 percent in 2013, the biggest annual increase in 18 years. Also, the official unemployment rate for December 2013 was 6.7 percent, the lowest rate of unemployment since October 2008, the last month before the economy began seeing the effects of the Great Recession.

Why are people feeling less financially secure about their current situation while the economy, as a whole, has been improving?

Averages don’t tell a complete story.

First, it’s clear that averages don’t apply to everyone. You can’t predict with precision any particular woman’s height when you observe that on average, women in the United States are 5 feet, 4 inches. Americans are in a better financial situation overall, but that doesn’t mean than any particular household is thriving more than last year.

But a survey of a representative sample should show that there is a positive trend.

Self-reporting and questions about feelings are not very accurate.

When the economy is improving but people’s financial lives aren’t, it doesn’t have much to do with averages. If the survey looked at people’s bank accounts and credit card statements, the results would undoubtedly be different than the Gallup poll’s results. This poll is asking people to make a judgment call. It’s a survey that asks about feelings, not about a financial reality. People don’t always know how to accurately report their financial situation.

That doesn’t mean that the survey has little value. Feelings about one’s financial situation are important, because it’s those feelings — not “reality” — that determine the choices people make about the future. It’s possible to have more money in the bank and less credit card debt this year than one had last year, but feel worse about the financial situation.

More knowledge results in more concern.

If you were blissfully unaware of the danger you were in financially last year, and at some point discovered the truth about your financial situation, it’s possible you’re more stressed this year than you were last year about money, despite being in a better position. My concern about my finances increased when I stopped ignoring my bills. The year I began keeping track of my finances, I might have reported feeling worse off financially than I felt the previous year, despite the truth that I was on the road to financial improvement.

Your friends appear to have improved.

One way people determine whether they’re better or worse off financially is by comparing their financial situation with the perception they have of their friends’ financial situations. Studies have shown that income satisfaction isn’t necessarily correlated to certain amounts of income, but the differential in income between a person and his or her friends and colleagues. In other words, a $50,000 income is satisfactory if your friends earn $40,000, but it’s not satisfactory if your friends earn $75,000.

This comparison plays a role in how you judge your financial situation. If your friends appear to have had a much more successful year than you have, you might be inclined to believe and report that you’re worse off financially now than you were the prior year.

And here’s the kicker. Your friends really are richer than you. A new research paper published this year uses the “friendship paradox” to illustrate this. The friendship paradox describes how your friends are more popular than you, because people who have more friends are more likely to also be friends with you. This is described in Slate:

People who have a ton of friends are more likely to be your friend in the first place. They have a greater tendency to make friends. People with a lot of friends drive the average number of friends up in tons of other people’s social networks because they are connected to so many other social networks…

It’s similar to going to the gym and feeling like the most out of shape person there. The reason that everyone around you is so in shape is because they’re at the gym all the time—that’s why you’re seeing them. Everyone else is at home relaxing and not getting in shape. You’re looking at a very biased sample of people.

When we compare the finances of our friends, we’re also looking at a biased sample of people. And when you see the wealth of your friends (and its growth over the past year) outshine your own, you’re more likely to feel bad about your financial situation and report that negative feeling in a survey.

The media affects your perception.

I saw The Wolf of Wall Street in a movie theater a few weeks ago. The film focused on a stock broker who committed crimes, stole investors’ money, lived a lavish lifestyle, and didn’t really get in that much trouble for his misdeeds. Much of the movie focused on his lavish lifestyle without too much criticism. Some will see the film as a glamorization of a lifestyle of excess, some will see it a a condemnation, but I think it was more successful as the former.

For all the criticism of the “one percent” in American culture over the past few years, we are still fascinated by the lifestyles of the rich and famous, as we see through films and television. While more of the middle class struggles, the more we look to the media to help us escape through fantasies about the financial life that will almost always be out of reach. More programs prey on the public’s desire to see stories about rich people, whether they’re stories of success or failure.

Either way, the proliferation of showcases of wealth in the media has an effect on the way we view our own lives, and this might also play a role in our perception of financial progress. That is, the more we see people flaunt their wealth in the media, the worse we feel about ourselves.

Do you feel worse off financially now than last year?

Here’s the question the Gallup organization asked in its survey:

Next, we are interested in how people’s financial situation might have changed. Would you say that you are financially better off now than you were a year ago, or are you financially worse off now?

I am financially worse off now. Technically, that may not be the case. I just paid a large tax bill, and my January balance sheet suffered because of that. But this is a tax bill I knew — or should have known — was coming, so my wealth hasn’t really changed. In fact, I’ve earned more income than I’ve spent over the last year, so my financially situation should have improved.

How would you answer this question?

Photo: Flickr/Gamma Man


I would have thought that all the shenanigans within the financial industry ended when regulators began looking into causes of the Great Recession. Today, the SEC announced that JPMorgan Chase is settling the charges that lying to investors was part of the method of operation for the company as late as the first quarter of 2012.

The company is settling for a penalty of $200 million, but this amount is added to recently settlements with other regulators and agencies for a total of $900 million.

JPMorgan Chase’s behavior that attracted SEC scrutiny

The SEC charges relate to a specific incident in March 2012. One of the divisions of JPMorgan Chase managed a portfolio designed to “hedge against adverse credit events.” In other words, if companies were to default on their own bonds on a large scale, this investment would increase in value. With a broad view, hedging is an important financial strategy, and every company should find a way to hedge against downward trends.

When you hedge, your performance should move in opposition to whatever forces you’re hedging against. Everyone else’s good news could be this portfolio’s bad news, and that’s precisely the case in the first quarter of 2012. At the end of March 2012, the stock market had just completed its best performing quarter since 1998. Meanwhile, the credit hedging portfolio at JPMorgan Chase started losing a lot of money.

According to the SEC, the traders involved with this portfolio decided to change how they were calculating the losses they were reporting to management. Previously, the traders would choose a price for each investment within the portfolio using a set of parameters that was understood and accepted. The price reported would simply be the mid-point within the spread between the bid and ask prices for each investment — a nice compromise. But when those prices reflected significant losses on a daily basis, a senior trader instructed a junior trader to stop reporting losses. So the junior trader came up with a new strategy.

The junior trader chose to report the most favorable price — the price that reflected the smallest loss — even if that price was outside of the spread. Using this pricing scheme to the company’s advantage when filing its quarter-ending financials with regulators and investors, JPMorgan reported a loss of only $138 million in that portfolio. The company later restated its financials, admitting it found fault in the calculation at the time, and the loss climbed by an additional $660 million.

An independent review later found that there would be an increase in loss of over $1 billion if the investments had been marked independently. The SEC further alleges that JPMorgan Chase lacked the communication and controls necessary to keep upper management aware of the fraud that had been occurring at the trader level. But you can’t put full blame on one or two rogue traders.

Blame the traders, blame the management, or blame the system?

Quarterly results can kill or crown companies. Wall Street puts pressure on many publicly-traded companies — especially those that operate on Wall Street — to produce outstanding results in the short-term. When the stock market as a whole is providing fantastic results, reporting one division with substantial losses is a surefire way to draw negative attention. People can get fired for bad results. Derivatives traders, who earn a substantial income and might use that income to live a life with their families one might not considered frugal, have a lot to lose.

Like Walter White, they might justify harmful behavior by wanting to provide for their family as much as possible. Their jobs are on the line every quarter; they want to be successful to protect themselves. If they can’t be successful, they want to appear successful.

When the hedge works in the expected direction, that is, when the underlying markets perform poorly and the hedging portfolio goes up in value, the derivatives traders are heralded as heroes. But if the derivatives continue to do their jobs as investments, the will be a financial sinkhole when the underlying markets improve. When this reality combines with the pressure to outperform all the time, there can be some temptation to adjust the numbers to be as favorable as possible to save one’s own job.

It’s this short-term, departmentalized culture that is a danger to companies in the long-term, and it’s a reason why much of Generation Y doesn’t trust Wall Street.

Management put their heads in the sand. They trusted the reported numbers from these traders, but what choice do they have? Management can’t oversee every price of every investment in every portfolio. But internal auditors can.

When I worked for a financial company, profit centers that did not report a high enough return on equity or income each quarter were in danger of being jettisoned from the organization — and this happened several times while I worked there. People’s livelihoods were changed when changes in the market resulted in poor performance in any one department despite the fact that the whole company was in good shape and losses in one area were offset by gains in another. Departmentalization requires every business unit to be profitable on its own, but singularly-focused departments, like an investment team concerned with one specific piece of the market, can’t do that every quarter.

This $200 million penalty may be so low because JPMorgan Chase has already changed its policies and restated its financial reports. But I’m not convinced that any problem has been solved here. Culture will continue to dictate that individuals within a company will willing to bend the rules in order to meet internal and external pressure for performance.

Here is the full SEC order in which the regulator describes the events leading up to the fraud in March 2012 and orders JPMorgan to change its policies and pay the $200 million penalty.

Photo: Flickr/eflon


The latest economic news from the Department of Labor paints a mediocre picture at best of the employment situation in the United States. It’s still difficult for young people to find full-time jobs. There may be some concern that this lower level of employment is going to be the new norm, and whether American society will need to adjust to a different type of employment environment.

Full-time jobs are being replaced by part-time jobs and contractor positions. This allows companies to save money on human resources expenses, including health insurance and other types of benefits. In a personal budget, if your family cuts back on food spending by buying lower quality ingredients, you can put more of your money in the bank, at least in the short-term.

Teenagers working

The long-term consequences of eating a less healthy diet, like refusing to invest in human resources, can be ultimately damaging – but perhaps that’s a concern for when the economy is in a better position. Don’t expect the economy to improve, however, until the middle class feels they have sufficient capital – a result of income from full-time jobs – to stimulate the economy. The situation can be a perpetuating cycle requiring an outside stimulus to improve.

For now, this problem remains. Young people are not finding full-time employment, even with a college degree. (College graduates are still doing better than those with only high school diplomas, though.) Here are a few tips for those in college to get the few jobs that may be available.

1. Reset your expectations. For now, you may need to forget about finding the perfect job in your field. This can be tough concept to digest. Out of college I didn’t want to consider any job that wasn’t precisely what I wanted to be doing for the following thirty years of my life. Eventually I had to settle.

Today, settling might mean taking an entry-level position at a local business or even signing up with a temp service. It might mean waiting tables. Consider taking a job “beneath” you so you can get out of your parents’ house, even if it means finding some roommates rather than buying a condominium right out of college.

While you’re working in one job, part-time or full-time, dedicate more of your personal time towards finding something better; at least you’ll be earning money while you look for a better fit.

2. Work like you’ve never worked before. Today’s environment is competitive. There are a lot of people looking for jobs and not enough openings for everyone. I’ve always held fast to the belief that working for someone else requires companies to provide strong motivation in return for demanding excellence, but demanding excellence from yourself regardless of where you’re working is great practice, and it shows your eventual dream employer that you have a great attitude with leadership skills.

Self-motivated excellence also builds valuable experience for when you are running your own company and need to dedicate a large portion of your life to its success and you need to demand excellence from others.

3. Meet everyone. If you aren’t getting to know the people you work with and the people you’d like to work with, you’ll always be trying catching others from behind. Make yourself known to decision makers. Have lunch with someone new each week, even if you’re bringing in a bag lunch to save money.

Choose someone further along in their career and ask them to be your mentor. I have had great successes from mentor/protégé relationships from both sides of the table. The education and development that comes out of a relationship like this is a different type than one might learn from either a classroom or from on-the-job training.

4. Market yourself. Any time I meet someone new I turn to Google, and if Google is my number one destination, the next may be Facebook and LinkedIn. When someone searches for your name on Google, what do the top website results say about you? The top result should be your own website that, in a subtle way, advertises who you are, what you do, and why you’re good at it. It doesn’t have to be a resume. Perhaps it’s a blog that focuses on the topic you studied in college or the industry you’re pursuing.

It should be professional and mature. You will stand out right away in a sea of young people whose only online presence consists of photos of meals and alcohol on Instagram.

Start a blog. Blogs, written and produced professionally, can help solidify you in the minds of potential employers as an expert or an expert-in-training, as long as you’re honest and authentic. Privatize your social media, but don’t rely on your privacy settings. A “friend” can easily publicly repost the latest photograph of you in your drunken stupor.

5. Get lucky. Sometimes finding the right full-time job is a matter of being in the right place at the right time. Luck isn’t always luck. It can be strategic. Richard Wiseman is the author of the book The Luck Factor: The Four Essential Principles. The author suggests readers maximize chance opportunities by networking and being open to new experiences, listening to intuition and keeping a positive attitude.

If you’re waiting for older generations to retire, creating a large need for young people to fill open roles in companies throughout the economy, you could be waiting a long time. The recession delayed retirement for an entire age group, and this might have long-lasting effects. For any young person to thrive in a super-competitive work environment, he or she will need to take some measures that may seem extraordinary compared to the lifestyle that Generation X has both enjoyed and set the tone for in corporate America.


When staff writer Sasha introduced Consumerism Commentary readers to in 2007, I began to think about the power of massive consumer financial data. As more people signed up for this online service that connects directly to users’ credit card accounts and bank accounts,, or any other similar services, would be able to analyze more accurate spending data than government surveys that rely on self-reported data, and possibly even industry surveys.

Now with 13 million users, has penetrated mainstream culture beyond just techies, who love tracking information online, and personal finance lovers, who look for any tools available to help them manage their money. Of these 13 million users, 2 million have opted in to this program, allowing to aggregate their transactions anonymously.

The company has now used the transaction data from this sample size of 2 million to produce what it’s calling the Intuit Consumer Spending Index. Intuit is the software company that now owns From the first quarter of 2009 to the first quarter of 2013, overall spending is up 9 percent, from $3,870 per month to $4,220 per month. Intuit announced its new index recently.

Because categorizes every transaction and knows where its users live, the analysis of the data behind the index can go into much more detail. For example, in the District of Columbia, spending has increased 30 percent over the time period, much more than the 9 percent national average. Why has spending increased so much in the nation’s capital? The report from Intuit doesn’t say specifically, but the underlying data might have some clues.

The index can also describe spending by category within each state or nationally, and the information exists to explain why spending within a category has changed. For example, spending on groceries has increased 17 percent over the time period.

While an increase in food prices may contribute to some of that increase — although inflation is taken into account when calculating the index to reflect real changes in spending, not nominal changes — the transactions categorized as groceries indicate that more spending has shifted to boutique grocery stores like Whole Foods. 19 percent of grocery shoppers shifted to Whole Foods while spending at Safeway decreased by 3 percent over the same time period. also knows the ages of the 2 million users who have opted in to aggregation by sharing their personal demographics. For users aged 26 to 31, spending on healthcare increased 45 percent from 2009 to 2013, and the same consumers are also spending more at restaurants — an increase of 40 percent. The report also highlights different spending patterns between men, who spend more on entertainment, alcohol, and restaurants, and women, who spend more on clothing.

I had several concerns about the Intuit Consumer Spending Index.

  • Is the 2 million user sample representative of the nation’s total population?
  • What is the possibility that many of the transactions are categorized incorrectly?
  • For people who use checks, how can know the recipient of the payment?

Intuit handles the first problem my normalizing its sample against the government’s Current Population Survey. For example, if people aged 18 to 24 comprise 25 percent of Intuit’s data but only 10 percent over the overall population, Intuit’s data is weighted to reflect the actual composition of the population. Intuit performs the same reweighting along all its demographic measures.

One way the company tries to focus on accuracy by ignoring transactions over $100,000, which are often recorded as mistakes, not actual spending, and by validating their data against Census Retail Sales data. That doesn’t help in categories where people don’t typically pay with credit or debit cards, like spending on cars — maintenance, auto loan payments, etc.

Unfortunately, the raw data used to create the index does not seem to be available. I suppose that’s understandable, as Intuit is a business enterprise, not a government entity, but it doesn’t allow any deeper analysis by economists — or financial writers. We have to rely on the information Intuit chooses to disclose in its press releases and reports. The company’s team does seem to be accessible, so I’m confident that I can relay any questions to the company’s own economists should there be any, and if I wanted to write about spending in a specific category or in a specific location, I could get the data from Intuit to use in a story.

It’s probably been a few years since I’ve logged into the account I created when the service became open to the public. It took me a while to log in because I couldn’t remember which email address I used to sign in — and I discovered by searching my email archives that it’s an email address I no longer use or have access to. After logging in, I saw that most of my accounts haven’t been updated in two or three years. I track my spending and investments with the desktop version of Quicken, so never appealed to me much.

Checking my account profile, I see that at some point I provided basic demographic information about myself — now outdated — so in some way, my inaccurate data, both inaccurate demographics and missing transactions, was included in the aggregation that resulted in the Consumer Spending Index. According to the methodology, my information was likely just ignored, like many users who haven’t visited the website enough for there to be meaningful data.


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In his State of the Union address to the United States Congress and the television-viewing audience around the world, President Obama called for an increase in the federal minimum wage as a way to reduce poverty. If you believe that business owners have a right to pay whatever the market will bear, minimum wages, whether […]

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