The unhappy medium

Paul Summerville links to this Washington Post article on the precarious financial situation of the average American family. While Summerville focuses on the numbers, it's the advice from financial planners consulted for the article that may be the most damning:

Speros and the other planners said, if the average family walked into their offices, they would sit them down and give them some tough talk. Time to pare back expenses, the financial advisers would say, in order to build a cash reserve big enough to get everyone through a layoff or other unforeseen adversity. And the family would get an earful about saving more aggressively for retirement, so members could have some hope of retiring at a reasonable age and maintaining the standard of living they and their family are accustomed to.

The closest the article can find to a positive spin is that the situation for most families is "not hopeless". But there's not much reason for hope as long as it's the norm for people to spend this far beyond their means...and indeed with the average family itself having little to no financial security it's clear that plenty of individual Americans are in far more dire straits.

Even the best-case scenario (i.e. one in which Americans follow the advice of the planners cited in the article) would have some major downsides, as the reduction in spending would itself lead to somewhat of an economic downturn. But if Americans don't start taking such steps in large numbers soon, there may be no chance to avoid a serious economic crash.