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African, Caribbean-Americans on spending spree

Posted by CaribShout on August 13, 2009 at 7:48pm
Despite a raging recession, rising unemployment and general economic uncertainty, a survey conducted by the National Weekly indicates that African and Caribbean-Americans have been on a spending spree over the last year, which has significantly eroded their disposable income (income remaining after all inescapable expenses). In the survey conducted among 519 residents in Miami-Dade, Broward and Palm Beach counties March 3 to 9, it was indicated that disposable income has slipped significantly from 7 percent in March 2008 to just 2 percent in March 2009. The natural reaction in seeing this data is for one to conclude that the severe reduction in disposable income is the result of individuals and families earning less money, or having one ore more members in the family unemployed. But this is not so. The survey showed that only 11 percent of people who had their disposable income serious depleted had their incomes reduced or lost jobs. Interestingly, although South Florida’s unemployment rate is over 8 percent and the national unemployment rate among Blacks is reported at over 11 percent, the survey found the rate of employment among those surveyed to be only 6.7 percent. What is obvious is that African-American and Caribbean-American residents of South Florida are spending too much. This conclusion has been arrived at by the following findings. Over the past year: Ownership of credit cards: increased from 52 to 69 percent Use of credit cards: increased from 57 to 91 percent More than one car in a household: increased from 47 to 70 percent (More than two cars in a household from 51 to 72 percent) Homeowners: increased from 58 to 61 percent Refurnished at least one room in house: increased from 17 to 25 percent Purchased new TV or other household appliance: increased from 23 to 39 percent Took a vacation (national or overseas) in the past year: increased from 21 to 33 percent Financing children in college: increased 17 to 23 percent Own a computer: increased from 41 to 64 percent Subscribe to Cable or Direct TV: increased from 46 to 81 percent Maintain savings account: decreased from 35 to 22 percent Out of the survey it was found that this community is very resourceful, or extremely keen on making expenses that are not essential. For example, 51 percent of parents surveyed said that it was essential that they purchase or help in purchasing a car for a teenaged son or daughter, and 43 percent said that it is extremely important to them to take a family vacation annually. More interestingly, 36 percent of those surveyed said that one of their goals is to exchange existing furniture for new ones, and 49 percent said it is also important to change their older TVs to the more modern flat screen TVs. The majority of those interviewed who subscribed to cable TV, spend over $100 month on this service, as they also contracted more expensive packages offering premium channels like HBO, Showtime and Cinemax. Another interesting point is that 67 percent said that most of the purchases for new clothes, appliances and furniture are done through credit cards. Consequently, 58 percent said that they had combined credit card debt exceeding $5,000, requiring monthly minimum payments averaging $160. The monthly payment for each car still being financed average $342, mortgages $1,610, residential rental $1,240, electricity $133, gasoline $180, food 430 and entertainment $180. Last year as the price of gasoline increased, a similar survey found that consumers were spending less, as there was the perception that gas could rise to up to $5 per gallon. However, as prices slipped to below $2 per gallon the caution was discarded, and spending resurged. Because of the high level of expenses by most consumers, very little income is being set aside in savings account, and only 21 percent indicated having such an account. As a result, close to 80 percent of the community is taking a major risk, incurring significant expenditures while living from paycheck to paycheck. This fact is indicative of the fragility of the current economic situation. While on the one hand, most economists theorize that what will drive the economy is heavy consumer spending, what does happen is that when consumers spend heavily, their spending equates the income they earn, leaving very little to be disposed in savings. If any of these people lose their jobs, they will be immediately placed in a financial predicament, further escalating the region’s and the nation’s economic plight. It therefore follows that it is irresponsible for consumers to spend without caution. The economy requires consumers to spend but not without concern of saving cash for bad times. This survey reveals that there are several areas in which consumers can reduce expense and improve their level of disposable income. If this is not done, and done soon, the community will be existing at a very serious financial risk. Written by Dr. Garth A. Rose

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