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Servicemembers Stick With Frugal Ways As Other Americans Warm Up To Spending, First Command Reports

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FORT WORTH, Texas — A shift in financial attitudes is taking place between middle-class military families and their civilian counterparts, with growing concerns over sequestration motivating servicemembers to stick to their frugal ways even as the improving economy is inspiring some members of the general population to warm up to spending.

An ongoing research initiative that looks at how financial attitudes have changed since the economic downturn reveals that just one in four middle-class military families (senior NCOs and commissioned officers in pay grades E-6 and above with household incomes of at least $50,000) display a mindset associated with more liberal spending behaviors. Meanwhile, these same attitudes are becoming more prevalent in the general population, where they are now held by roughly a third of consumers.

Called “Free Spirits,” these spendthrift consumers made up just 25 percent of middle-class households in 2009 and 2010 during the depths of the economic downturn. Their numbers rose slightly in 2011 and 2012, holding at just under 30 percent. The gap between military families and the general population began to appear last year. The annual results for 2013 show that Free Spirits made up 26 percent of military households and 30 percent of the general population. The most recent quarterly results show the size of gap is still growing. During the fourth quarter of 2013, the percentage of Free Spirits in military households dropped three points to 24 percent and in general population households surged seven points to 34 percent — a 10-point gap.

A related shift is under way in frugal behaviors. “Scared Straight,” the subset of consumers who responded to the economic downturn with a focus on frugal living, made up 36 percent of middle-class households in 2009. While their ranks have dropped overall, a gap has appeared between military families and the general population. The annual results for 2013 show that Scared Straight makes up 33 percent of military households and 29 percent of the general population; the two populations were both 31 percent the previous year. Again, the most recent quarterly results show the size of the gap is growing. During the fourth quarter of 2013, the percentage of Scared Straight consumers in military households increased four points to 35 percent and in general population households dropped five points to 27 percent — an eight-point gap.

For the general population, the shift away from Scared Straight and toward Free Spirits shows a clear connection to improvements in the key economic indicators of unemployment and consumer confidence. But military families are heavily impacted by recent economic turmoil as they feel the effects of sequestration and defense downsizing, resulting in a shift towards Scared Straight and away from Free Spirits.

“Today’s military families are not feeling very free spirited at all,” said Scott Spiker, CEO of First Command Financial Services, Inc. “Fears of sequestration and defense downsizing are replacing the old economic concerns of a few short years ago. Four out of five military families expect to be financially affected by anticipated cuts to defense spending. These new fears are not shared by the general population, where lower unemployment rates and improving consumer confidence are prompting a change in attitude — a change that suggests an eventual resurgence in consumer spending.”

Free Spirits and Scared Straight are among four distinct consumer segments first identified in 2009 as part of the First Command Financial Behaviors Index®. The four segments reveal how financial attitudes were changed by the economic downturn, and they continue to track differences in consumer views on spending and saving. The segments are defined as:

  • Free Spirits. These consumers may save money, but they believe in spending that money too — on vacations, consumer purchases and activities that add value to their life and help them enjoy the present.
  • Foul Weather Frugals. Members of this segment have embraced cutbacks and frugality for now, but may revert back to old, spendthrift behaviors once the economy is back on its feet. The size of this group has held steady over time; for 2013, military families made up 22 percent and the general population was 23 percent.
  • Scared Straight. These Americans have been “scared straight” after seeing the effects of the recession on their finances. Their main concern is paying off debts and managing their monthly bills.
  • True Frugals. They have embraced frugality as a lifestyle. They have always made prudent financial choices, and would do so whether or not the country is in a recession. The size of this group has also held steady over time; for 2013, military families made up 19 percent and the general population was 18 percent.

“If the trends we are seeing today continue into the future, we could be headed toward a divided Middle Class of military families attempting to deal with the effects of defense downsizing through a continued commitment to frugal living and a general population feeling more confident and opening their wallets to the economic recovery,” Spiker said. “The positive news for military families is that our research has consistently shown that frugal behaviors can deliver an emotional lift. By remaining focused on saving more and spending less, middle-class military families are arming themselves both financially and emotionally for the changes ahead and can feel more secure about their future.”

The research also reveals that almost half of military families in the True Frugals and Scared Straight segments report that they are working with a financial advisor, a practice that is consistently associated with feelings of financial security and confidence in the future.

“We expect a growing number of military families to seek out the assistance of a trusted financial professional as they strive to deal with a world of reduced pay and benefits and uncertain career longevity,” Spiker said.

About First Command Financial Behaviors Index®

Compiled by Sentient Decision Science, Inc., the First Command Financial Behaviors Index® assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 530 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 4.3 percent with a 95 percent level of confidence. Financial Behaviors Index

About Sentient Decision Science, Inc.

Sentient Decision Science was commissioned by First Command to compile the Financial Behaviors Index®. SDS is a behavioral science and consumer psychology consulting firm with special vertical expertise within the financial services industry. SDS specializes in advanced research methods and statistical analysis of behavioral and attitudinal data.

About First Command

First Command Financial Services and its subsidiaries, including First Command Bank and First Command Financial Planning, assist American families in their efforts to build wealth, reduce debt and pursue their lifetime financial goals and dreams—focusing on consumer behavior as the first and most powerful determinant of results. Through knowledgeable advice and coaching of the financial behaviors conducive to success, First Command Financial Advisors have built trustworthy, lasting relationships with hundreds of thousands of client families since 1958.


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