MONEY alternative assets

Lending Club’s $4 Billion IPO Puts Peer-to-Peer Lending in the Mainstream

IOU note
Getty Images

Lending Club priced its IPO on Monday, putting it in the ranks of the biggest public offerings ever for an Internet company. Here's what you need to know about peer-to-peer lending.

UPDATE: On Monday, peer-to-peer lending company Lending Club announced it would be pricing its upcoming IPO at $10 to $12 a share in an effort to raise as much as $692 million. (Click here to read the filing.) At the midpoint of the range, that would value the company at around $4 billion. Now that P2P lending has firmly entered the mainstream (and then some), it’s worth looking again at the advice we published in August, when Lending Club filed to go public, on how P2P lending works and how best to use Lending Club and similar services.

Your bank makes money off borrowers. Now you have the opportunity to do the same. One of today’s hottest investments, peer-to-peer lending, involves making loans to strangers over the Internet and counting on them to pay you back with interest. The concept may be a bit wacky, but the returns reported by sites specializing in this transaction—from 7% to 14%—are nothing to scoff at.

Investors aren’t laughing either. Lending Club, one of the leading peer-to-peer lending companies, filed to go public on Wednesday. The New York Times reports the company is seeking $500 million as a preliminary fundraising target and may choose to increase that figure.

Such lofty ambitions should be no surprise, considering that the two biggest P2P sites are growing like gangbusters. With Wall Street firms and pension funds pouring in money as well, Lending Club issued more than $2 billion of loans in 2013, and nearly tripled its business over the prior year. In July, Prosper originated $153.8 million in loans, representing a year-over-year increase of over 400%. The company recently passed $1 billion in total lending. “A few years ago I would have laughed at the idea that these sites would revolutionize banking,” says Curtis Arnold, co-author of The Complete Idiot’s Guide to Person to Person Lending. “They haven’t yet, but I’m not laughing anymore.”

Here’s what to know before opening your wallet.

How P2P Works

To start investing, you simply transfer money to an account on one of the sites, then pick loans to fund. When Prosper launched in 2006, borrowers were urged to write in personal stories. Nowadays the process is more formal: Lenders mainly use matching tools to select loans—either one by one or in a bundle—based on criteria like credit rating or desired return. (Most borrowers are looking to refi credit-card debt anyway.) Loans are in three- and five-year terms. And the sites both use a default investment of $25, though you can opt to fund more of any given loan. Pricing is based on risk, so loans to borrowers with the worst credit offer the best interest rates.

Once a loan is fully funded, you’ll get monthly payments in your account—principal plus interest, less a 1% fee. Keep in mind that interest is taxable at your income tax rate, though you can opt to direct the money to an IRA to defer taxes.

A few hurdles: First, not every state permits individuals to lend. Lending Club is open to lenders in 26 states; Prosper is in 30 states plus D.C. Even if you are able to participate, you might have trouble finding loans because of the recent influx of institutional investors. “Depending on how much you’re looking to invest and how specific you are about the characteristics, it can take up to a few weeks to deploy money in my experience,” says Marc Prosser, publisher of and a Lending Club investor.

What Risks You Face

For the average-risk loan on Lending Club, returns in late 2013 averaged 8% to 9%, with a default rate of 2% to 4% since 2009. By contrast, junk bonds, which have had similar default rates, are yielding 5.7%. But P2P default rates apply only to the past few years, when the economy has been on an upswing; should it falter, the percentage of defaults could rise dramatically. In 2009, for example, Prosper’s default rate hit almost 30% (though its rate is now similar to Lending Club’s). Moreover, adds Colorado Springs financial planner Allan Roth, “a peer loan is unsecured. If it defaults, your money is gone.”

How to Do It Right

Spread your bets. Lending Club and Prosper both urge investors to diversify as much as possible.

Stick to higher quality. Should the economy turn, the lowest-grade loans will likely see the largest spike in defaults, so it’s better to stay in the middle to upper range—lower A to C on the sites’ rating scales. (The highest A loans often don’t pay much more than safer options.)

Stay small. Until P2P lending is more time-tested, says Roth, it’s best to limit your investment to less than 5% of your total portfolio. “Don’t bank the future of your family on this,” he adds.

MONEY Investing

13 Things to Do with $100,000 Now

domino stacks of $10,000 bills
Ralf Hettler—Getty Images

Oh, if only six figures landed in your lap tomorrow. Hey, you never know. In case it does—or in case you're lucky enough to have 100 grand put away already—you'll want to have these smart moves in your back pocket.

1. Say “yes” to a master
Unless you live in one of the few areas where the real estate market hasn’t come to life, the decision of whether to move or improve is likely tipped in favor of remodeling, says Omaha appraiser John Bredemeyer. A new bedroom, bath, and walk-in closet may cost you $40,000 to $100,000. But it’s unlikely you’d find a bigger move-in-ready abode with every­thing you want for only that much more, especially after the 6% you’d pay a Realtor to sell your current home.

2. Burn the mortgage
If you’re within 10 years of retiring, paying off your house can be a wise move, says T. Rowe Price financial planner Stuart Ritter. You’ll save a lot of interest—$24,000, if you have a $100,000 mortgage with 10 years left at 4.5%. Eliminating the monthly payment reduces the income you’ll need in retirement. And as long as you’re not robbing a retirement account, erasing a 4.5% debt offers a better return than CDs or high-quality bonds, says Ritter.

3-5. Buy a business in a box
One hundred grand won’t get you a McDonald’s (for that you’ll need 10 or 15 friends to match your investment)—but there are a number of other good franchises you can buy around that price, says Eric Stites, CEO of Franchise Business Review. Here are three that get top raves in his company’s survey of owners:

  1. Qualicare Family Homecare (a homecare services firm)
  2. Window Genie (a window and gutter cleaning service)
  3. Our Town America (a direct mail marketing service)

6. Tack another degree on the wall
On average, someone with a bachelor’s degree earns $2.3 million over a lifetime, vs. $2.7 million for a master’s and $3.6 million for a professional degree. The payoff varies by field: In biology a master’s earns you 100% more, vs. 23% in art. So before applying, find out how much more you could earn a year, research tuition, and determine how long it’ll take you to recoup the investment.

7. Make sure you won’t be broke in retirement
More than half of Americans worry about running out of money in retirement, Bank of America Merrill Edge found. Allay your fears with a deferred-income annuity: You pay a lump sum to an insurance company in exchange for guaranteed monthly payments starting late into retirement. Because some buyers will die before payments start, you get more income than with an immediate annuity, which starts paying right away. A 65-year-old woman who puts $100,000 into an annuity that kicks in at age 85 will get $3,500 a month, vs. $600 for one that starts this year. In the future you could see deferred annuities as an investment option in your retirement plan; the Treasury Department just approved them for 401(k)s.

8. Get a power car that runs on 240v
For just over $100,000 (after a $7,500 tax rebate), you can be the proud owner of an all-electric Tesla Model S P85, with air suspension, tech, and performance extras. Yes, that’s a pretty penny. But you’ll help the planet, eliminate some $4,000 a year in gas bills—and get a ride that gets raves. “The thing has fantastic performance,” says Bill Visnic of It goes from 0 to 60 in 4.2 seconds and drives 265 miles on a charge, which requires only a 240-volt outlet.

9-12. Put hotel bills in your past
Think you missed the window on a vacation-home deal? True, the median price has jumped 39% since 2011, according to the National Association of Realtors. “But while you can’t buy just anything, anywhere, for 100 grand anymore, there are still decent deals out there in appealing ­places,” says Michael Corbett of Here are four markets where the price of a two-bedroom condo goes for around that amount:

  • Sunset Beach, N.C./$96,000
  • Fort Lauderdale/$116,000
  • Colorado Springs/$117,000
  • Reno/$117,000

13. Tone up your core
The average American saving in a 401(k) has nearly $100,000 put away ($88,600, to be exact, according to Fidelity). With this core money, you’re likely to do better with index funds vs. active funds, says Colorado Springs financial planner Allan Roth. “The stock market is 90% professionally advised or managed, and outside Lake Wobegon, 90% can’t be better than average.” His three-fund portfolio: Vanguard’s Total Stock Market Index, Total International Stock Index, and Total Bond Market.

Related: 35 Smart Things to Do With $1,000

Related: 24 Things to Do with $10,000

Tell Us: What Would You Do With $1,000?

MONEY Investing

35 Smart Things to Do With $1,000 Now

Andrew B. Myers

These moves can make you smarter, healthier, happier—and richer.

1. Buy 1 share of Priceline Group THE PRICELINE GROUP INC. PCLN -0.38%
The fast-growing travel biz has just 4% global market share, leaving plenty of room to expand.

2. Buy 10 shares of Apple APPLE INC. AAPL 0.08%
The Mac daddy has a dividend yield of 1.9% and a cheap price/earnings ratio of 14.1.

3. Buy 50 shares of Ford FORD MOTOR COMPANY F -2.6%
The automaker has a P/E of 10.5, a 2.8% dividend yield, and a record (5%) market share in China.

4. Grab the last of the great TVs
While they’re considered superior to LCDs—for having deeper blacks and any-angle viewing—plasma TVs haven’t been profitable enough for manufacturers, so most are curbing production. LG is one of the last in the game, and its ­60-inch 60PB6900 smart TV (around $1,000) has apps to stream digital content and 3-D performance besting its peers. Get the extended warranty, since a service company would have to replace the TV if parts are no longer available.

5. Kick tension to the curb with yoga…
Half of workers say they’re less productive due to stress, the American Psychological Association found; worse, research from the nonprofit Health Enhancement Research Organization found that health care expenses are 46% higher for stressed-out employees. Regularly practicing yoga can help modulate stress responses, according to a report from Harvard Medical School. Classes cost about $15 to $20 a pop, which means that $1,000 will keep you doing downward dog twice a week for about half a year.

6. …Or acupuncture
A recent article in the Journal of Endocrinology found a connection between acupuncture and stress relief. Your insurer may cover treatment, but if not, sessions run $60 to $120 a piece. So you can treat yourself to around 10 to 15 with $1,000.

7. …Or biking
Research suggests that 30 minutes a day of moderate exercise can lower levels of the stress hormone cortisol. So take a bike ride after work. The ­Giant Defy 2 ($1,075) is one of the best-value performance bikes out there, Ben Delaney of says.

8. Give your kids ­a jump on retirement
Assuming your kids earn at least a grand this year from a summer job or other employment, you can teach them the importance of saving for retirement by depositing $1,000 (or, if they earn more and you’re able, up to $5,500) into Roth IRAs in their names. Do so when the child is 17, and it’ll grow to over $18,400 by the time he’s 67 with a hypothetical 6% annual return, says Eau Claire, Wis., financial planner Kevin McKinley.

9. Get over your midlife crisis
Would getting behind the wheel of your dream vehicle make you feel a teensy bit better about reporting to a 30-year-old boss? Then sow your oats—for 24 hours. Both Hertz and Enterprise offer luxury rentals; you can find local outfits by searching for “exotic car rental” and your city. Gotham Dream Cars’ Boston-area location rents an Aston Martin Vantage Roadster for $895 a day.


Andrew B. Myers

10. Iron out your wrinkles
For a safer and cheaper alternative to going under the knife, try an injectable dermal filler. Dr. Michael Edwards, president of the American Society for Aesthetic Plastic Surgery, recommends Juvéderm Voluma XC, which consists of natural hyalu­ronic acid that helps smooth out deep lines and adds volume to cheeks and the jaw area. It lasts up to two years and costs near $1,000 per injection.

11. Live out a dream
Play in a fantasy world with these adult camps, which cost in the neighborhood of $1,000 with airfare: the four-day Adult Space Academy in Huntsville, Ala. ($650); the Culinary Institute of America’s two-day Wine Lovers Boot Camp in St. Helena, Calif. ($895); or the one-day World Poker Tournament camp in Vegas ($895).

12. Hire someone to fight with your folks
Is your parents’ home bursting at the seams with decades of clutter … er, memories? Save your breath—and sanity—by hiring a profes­sional organizer (find one at for them. Mom and Dad may listen more to an impartial party when it comes to deciding what to toss, says Austin organizer Yvette Clay. Focus on pile-up zones, like the basement, garage, and living room (together, $500 to $1,500).

13. Launch
A professional website will help you stand out to employers, says Jodi Glickman, author of Great on the Job. Buy the URL of your name for about $20 a year from GoDaddy and find a designer via Elance​.com or; $1,000 should get you a nice-looking site with a bio, blog, photos, and portfolio of your work.

14. Become a techie—or just learn to talk to one
Technical knowledge isn’t just for IT folks anymore. “Digital literacy is becoming a required skill,” says Paul McDonald, a senior executive director of staffing agency Robert Half International. Get up to speed with one of these strategies. Understanding how websites, videogames, and apps are built is useful to almost any job dealing in big data or search algorithms, says McDonald. Take a course in programming for nonprogrammers at ­ ($550), then get a year’s subscription to ($375) for more advanced online tutorials.

15. Get tweet smarts
Take a class to give you expertise—and confidence— in using social media and analyzing metrics. MediaBistro’s social media boot camp includes five live webcast sessions for $511, and you can add four weeks of classroom workshops with pros for $449. #olddognewtricks

16. Buy the Silicon Valley gear
Need a new laptop now that you’re a tech whiz? To best play the part, go with Apple’s MacBook Air ($999) or its big brother the MacBook Pro ($1,099). With a long battery life and powerful processors, the Air and Pro are the preferred picks for developers, coders, and designers, says’s Brian Westover.

David Kilpatrick—Alamy

17. Save your cellphone camera for selfies
Your most important memories shouldn’t be grainy. Get a digital SLR camera featuring a through-the-lens optical viewfinder, “which is still essential for shooting action,” says Lori Grunin of CNET. Her pick, Nikon’s D5300 ($1,050). Its 18–140mm lens produces sharp images shot quickly enough for most personal photography.

18. Class up your castle
Interior decorating can cost a fortune—insanely priced furnishings, plus a 30% commission., launched in 2012 and now in eight metro areas, upends the model. The site’s decorators charge hourly ($130 or less) and suggest affordable furnishings.

19-21. Hire a good manager
With only 10 C-notes, your mutual fund choices are limited by minimum investment requirements. Besides simply letting you in the door, these actively managed funds have relatively low fees and beat more than half their peers over three, five, and 10 years:
Oakmark Select large blend; 1.01% expenses
Schwab Dividend Equity large value, 0.89% expenses
Nicholas large growth, 0.73% expenses

22. Primp the powder room
Get a new sink and vanity for a refresh of your guest bathroom without a reno. You can find a combined vanity and sink set for under $650; figure another $100 to $200 each for faucet and labor.

23. Replace light fixtures
Subbing in new lighting in the dining room, the front hall, and possibly the kitchen can take 20 years off your house, suggests Pasadena realtor Curt Schultz. You’re likely to pay $100 to $400 per fixture, plus $50 to $100 for installation.

24. Swap out the front door
It’s the first impression guests and buyers have of your home. Look for a factory-finished door—possibly fiberglass if it’s a sunny southern or western ­exposure without an overhang. You could pay $1,000 for the door and the installation.

25. Catch up on retirement.
If you’re 50 or older, you can put in $1,000 more in an IRA (above the $5,500 normal limit) each year. Do so from 50 to 65, and you’ll have $27,000 more in retirement assuming you get a 6% annual return, per T. Rowe Price.

Ingolfur Bjargmundsson—Getty

26. Fly solo to see the Northern Lights
As more companies package deals to Iceland, prices are dropping, says Christie McConnell of You could recently find four-night packages with airfare, hotel, and tours for $800 a person. Go in late fall to see the Northern Lights.

27. Hit the beach in Hawaii
The islands are still working through the overbuilding of hotels that began before the recession, says Anne Banas of Three-night packages for fall with hotel and airfare start around $500 a person from the West Coast.

28. Give your car a makeover
You can’t get a new set of wheels for 1,000 smackers, but you can make your old car feel new(ish) again with this slew of maintenance fixes: A new set of tires ($600), a full car detail ($100), new wiper blades ($50), a wheel alignment ($150), and a synthetic oil change ($100). You’ve likely been putting these off until something breaks, but there’s good reason to do them all at once. Besides giving your car a smoother ride, “this preventative maintenance will help you nurse your car longer, while also saving some gas,” says Bill Visnic, senior editor at New car smell not included.

29. Make like (early) Gordon Gekko
Wall Street buyout firms KKR and Carlyle are inviting Main Street investors into private equity funds for $10,000 and $50,000, respectively. Want to play the game with less scratch? Invest $1,000 in Blackstone GroupBLACKSTONE GROUP LP, THE BX 0.21% . Shares of the private equity giant have a 5.1% yield and a cheap P/E of 8.5, plus Blackstone is a top-notch alternative-asset firm, says Morningstar’s Stephen Ellis.

30-32. Put your donations to work where they’ll do the most good
Groups that focus on improving healthcare in the developing world have some of the best measurable outcomes of all charities, says Charlie Bresler, CEO of The Life You Can Save. Many of the supplies used to improve and save lives, like vaccines or mosquito nets, cost pennies to produce, he says, and surgeries that cost tens of thousands in the U.S. can be performed for a few hundred bucks overseas. Three great organizations working in those areas: SEVA Foundation, which works to prevent blindness; Deworm the World, which seeks to eradicate worms and other parasitic bacterial disease; Fistula foundation, which provides surgical services to women with childbirth injuries.

33. Defend the fort
An alarm system can pare as much as 20% from a homeowner’s policy, and the latest ones have neat bells and whistles. Honeywell’s LYNX Touch 7000 (starting at $500, plus $25 to $60 a month) links to four cameras that stream live video. It randomly switches on lights to make an empty home look occupied—and can detect a flood and shut down water.

34. Enjoy a buffet of entertainment
The average cable bill is expected to hit $123 a month in 2015—or $1476 a year—according to the NPD group. What if we told you you could cut the cord, redeploy $1,000 of that to getting two years worth of the following digital libraries, and still bank about 500 bucks? Yeah, we thought so.
For old movies and TV shows…get Netflix ($7.99-$8.99/month). Analysts estimate the company’s library is much larger than that of Amazon Prime.
For current TV shows…watch via Hulu ($7.99/month), which offers episodes from more than 600 shows that are currently on air.
For music…stream with Spotify Premium ($9.99/month). The premium version lets you skip commercials and listen to millions of songs even offline.
For books…read via Kindle Unlimited ($9.99/month). You can access the company’s library of more than 600,000 ebooks and audiobooks with one of its free reading apps, which work Apple, Android or Windows Phone devices.

35. Protect your heirs.
For about $1,000 you can have a will, durable power of attorney, and health care directive written up. Find an estate planner at

Related: 24 Things to Do With $10,000 Now
Tell Us: What Would You Do With $1,000?

MONEY Savings

5 Ways to Keep a Crisis From Crushing You

Falling anvil with inadequate parachute
Michael Crichton + Leigh MacMill; Prop Styling by Jason MacIsaac A majority of Americans are unprepared for a financial emergency.

What would you do if you suffered an emergency that's bigger than your safety net? These strategies can cushion the blow.

You’ve no doubt diligently socked away a chunk of cash for a rainy day. But chances are it isn’t enough to keep you from worrying about being swept under by a passing financial storm. In a MONEY survey of 1,000 Americans conducted earlier this year, 60% of respondents said they didn’t feel they had enough emergency savings.

They’re probably right to be ­concerned: A new survey by found that the majority of Americans making $75,000-plus have less than six months of emergency savings on hand. Meanwhile, experts typically recommend having at least that much and often as much as 12 months’ worth—lofty goals even for those who are otherwise well-off.

While you’re in the process of bulking up your kitty, lessen your anxiety by figuring out how you’d quickly lay your hands on cash if the roof fell in, literally and figuratively. “The goal is to reduce long-term damage to your finances,” says Scottsdale financial planner Brian Frederick. Putting the bills on a credit card can be a reasonable option for those able to pay off their debt in a jiffy, but carrying a balance for longer gets pricey when you’re talking about a 15% interest rate. Instead, keep these five better options in the back of your mind:

1. Crack a CD

In hopes of discouraging customers from fleeing when rates rise, banks have been hiking penalties for tapping a CD before its maturity date—six months’ interest is now common on a one-year certificate, and six to 12 months’ is typical on a five-year. Even so, “the interest is so small these days that a six-month penalty is almost meaningless,” says Oradell, N.J., financial planner Eric Mancini. On a $100,000, five-year CD at 2%, you’d give up just $100.

2. Sell Some Securities

Ditching money-losing stocks is clearly a better move than borrowing, says Frederick, given that you can use losses to offset up to $3,000 of capital gains for this year and carry any overage into future years. Everything in your portfolio on the up and up? While you’ll pay a 15% capital gains tax on the profits from any security you’ve held for more than a year, it might make sense to pare back on winners if your allocation has gotten out of whack.

3. Take Out a 401(k) Loan

Most plans allow you to borrow half your vested amount, up to $50,000, with generous terms: no setup fees and a 4% to 5% interest rate, paid to yourself. Moreover, as long as you keep making contributions, you probably won’t sacrifice much growth. A five-year, $20,000 loan against a $250,000 401(k) would reduce your balance by just $9,000 after 20 years, assuming you continued to save $500 a month during the loan term. But should loan payments require you to pull back on contributions, your nest egg will take a hit (see the graphic). Another risk: If you leave your job for any reason before repaying, you must cough up the entire balance within 60 days, or else you’ll owe income taxes and a 10% penalty on the funds. “You can end up feeling stuck in your job,” says Edina, Minn., ­financial planner Kathleen Longo.

the 20k loan

4. Tap the House

Whether or not you have a home-equity line of credit already, you’ll benefit from today’s low rates. The average on a new line is about 5%, but if your credit is nearly perfect, you can get closer to 3%, with no setup fee, Bank­ reports. Plus, interest payments are usually tax-deductible. The caveats: It may take a few weeks to open a new line. Also, HELOCs are var­iable rate, so your payments may rise if the Fed hikes interest rates. Finally, some banks charge a fee if you close the line early; look for one that doesn’t.

5. Borrow from a Stranger

Those who don’t have adequate home equity can still beat rates on credit cards and personal bank loans by nabbing a loan from a peer-lending site like LendingClub or Prosper. Rates on those sites can be less than 7%, plus an origination fee of 1% to 3%. Peer loans are a good option for those with sterling credit histories, says Steve Nicastro, investing editor at NerdWallet. Check what rate you’d get using the sites’ tools. Look good for you? After you fill out an online form, the sites will take a few days to verify your info, then send your loan out to prospective lenders. Most loans are funded within a week.

More on building a stronger safety net:


7 Ways to Stop Fighting About Money and Grow Richer, Together

Dan Saelinger candy hearts

An exclusive MONEY survey reveals sweeping changes in how husbands and wives are managing their finances. Use these insights and strategies to get on the same page with your spouse and make your money work harder–and better–for both of you.

When she graduated from college two decades ago, Jehan Chase had traditional expectations about money and marriage. She figured she’d soon fall in love, settle down, and, once she was wed, turn over managing the family’s finances to her husband. “I thought it would be nice not to have that responsibility,” she says. But life hasn’t followed the script. Instead, Jehan, 44, stayed single until two years ago; by then she’d built a successful career as a government attorney and had become accustomed to managing her own money. After her marriage to Seth, 40, an advocate for a nonprofit who makes a good deal less than she does, Jehan continued to take the lead in managing money for the Alexandria, Va., couple—partly out of convenience, since Seth already had his hands full taking care of his disabled mother and sister, and partly because she didn’t want to cede control. She says, “I’m comfortable being in charge of the finances.”

For his part, Seth, who had been the bigger earner in his previous marriage, says the income role reversal took some getting used to. Now, though, he’s happy with the way the couple manage their money. “Jehan works in a field that pays better than the one I work in, so the income difference isn’t an issue for me,” he says. “She seems to really like doing the finances—and she’s better at it than I am.”

The growing number of wives who, like Jehan Chase, make as much as or more than their husbands is having a profound impact on the way that married couples manage their money and how they feel about their financial union. That’s the clear takeaway from a new national MONEY survey of more than 1,000 married adults ages 25 and older. The ­responses reveal that as wives’ economic contribution to the household grows—on average, women in dual-earner households now bring in about half of the family income and nearly a quarter of wives earn more than their husbands —every aspect of couples’ lives together is affected. That means not just how they save, spend, and invest but also what they worry about, what they fight about, and even how happy they are in their relationships. “Traditionally women’s income was ‘pin money,’ used for extras like shoes or kids’ braces,” says Liza Mundy, author of The Richer Sex. “Now many families have fully integrated the woman’s earning power into their financial planning. That’s a real transformation.”

What’s clear from the MONEY survey is that this transformation extends far beyond the numbers in the family’s bank account. When women earn as much as or more than their spouses, the results show, they take a far more active role in financial planning, getting deeply involved in everything from budgeting to retirement planning. They bring a more collaborative style to managing the household’s money. And husbands, by and large, appear pleased with the results. “These days women are engaged in all aspects of personal finance,” says New York University sociology professor Kathleen Gerson, who is working on a study about how contemporary work habits are reshaping family life. “It’s not only acceptable; it’s expected.”

These new dynamics, however, are also creating new tensions, as women feel heightened financial stress, men come to grips (or not) with shared decision-making, and both spouses struggle to figure out a fair division of labor (financial and otherwise) at home. Meanwhile, no matter how much the husband or wife earns, the survey found that money remains the top source of friction for couples overall, with spending a particularly contentious issue. And while spouses overwhelmingly think they’re in sync about their finances, the survey results also make clear that when it comes to money, they are typically anything but: Husbands and wives often don’t agree on the roles they play and the financial skills they have, or understand what really matters to their partner.

How can you ensure that this conclusion doesn’t describe your relationship? The insights and advice in the story that follows—the first in a three-part MONEY series that looks at how major demographic shifts are changing the finances of American families—will give you a better understanding of the challenges you face and the ways that you and your spouse can work together to build a richer, happier life.

Finding No. 1: Women who bring home the bacon like to cook it too.

The more a wife earns relative to her husband, the greater her involvement in all aspects of the family’s finances—especially the responsibilities that have traditionally been the purview of men, such as investing and retirement planning. That insight from the MONEY survey makes intuitive sense and may not be surprising. What is startling: the extent to which a woman’s contribution to the family’s income drives her financial participation, either as chief decision-maker or in concert with her spouse, and the effect it has on how she feels about managing money. “There is a definite relationship between a woman’s earnings and her confidence with finances,” says psychologist and certified financial planner Brad Klontz, co-author of Mind Over Money.

Consider: About 80% of the wives in our survey who earn more than their husbands say they’re very or extremely knowledgeable about financial matters, compared with just over half of those who earn less (and lower-earning women are three times as likely to say they know very little). That greater confidence translates directly into action. For instance, wives who are the larger breadwinner are roughly three times as likely as lower-earning women to take the lead in investing and retirement planning. They’re also more apt to be in charge of the household budgeting and bill paying, and to buy ­insurance for the family.

And it’s not just the women who say so. Husbands in the survey who didn’t earn as much as their wives were far less likely to say they were the primary decision-maker, although they remained a lot more involved than wives who earn less or no salary in nearly all areas. “Money management is still a role men pride themselves on,” says Seattle sociologist Pepper Schwartz, co-author of The Surprising Secrets of Happy Couples.

What’s apparent is that while men typically feel ownership in the family’s finances no matter how much they earn, women often need to be making a direct and substantial monetary contribution before they feel the same. “I do the research on our investments and spearhead those decisions, and a lot of that does have to do with the fact that I make more,” says Amanda Austreng, 27, a medical lab scientist in St. Paul who out-earns husband Nick, 26, a preschool teacher. “I want to make sure my money is doing as much as it can.”

For greater harmony:

  • Manage based on interest, but decide together. Who earns what is a lousy way to determine who does what when it comes to your money. One person is usually more interested in financial chores or available to handle them, and as long as you agree on who is best suited to a particular responsibility, it’s fine for that spouse to take charge of, say, paying bills, picking mutual funds, or preparing the taxes. Just be sure to draw a clear distinction between tasks and decisions, says psychologist Jonathan Rich, author of The Couple’s Guide to Love and Money: “No one has the right to single-handedly guide the family’s goals.”
  • Master the basics. While it’s understandable that women step up their game as they earn more, both partners, regardless of how much they earn individually, need to be clued in about the family’s finances, says Atlanta financial planner Mary Claire Allvine. It’s particularly dangerous for women to remain in the dark, as they tend to outlive men:“I see my older female clients having wealth management thrust on them, and it’s un­charted territory,” Allvine says. Schedule uninterrupted time, a minimum of twice a year, to sit down with your spouse and review what you own and what you owe. Then discuss how these numbers jibe with your immediate and future financial goals.

Finding No. 2: The spouse who earns more drives the financial style.

When husbands are the bigger earners, they take the lead in managing the couple’s money—especially in their own estimation. When asked who is primarily responsible for major decisions about retirement planning and portfolio management, for example, six in 10 higher-earning men claimed the title, with only 39% saying they share the role with their wife.

By contrast, in the view of both husbands and wives, households in which the woman makes the same as or more than her spouse have a collaborative money management style—“We decide” vs. “I decide.” Overall, nearly two-thirds of respondents from these families say they share financial decision-making with their partner, compared with less than half from households in which the man earns more. Perhaps most telling: Only 4% of lower-earning husbands feel they’re not a financial ­decision-maker in the family, vs. 28% of lower-earning wives.

These gender-driven differences in approach echo the contrasting professional styles that researchers have observed in the workplace, says University of Maryland sociology professor Philip Cohen. He notes that female managers tend to be more collaborative and relationship-oriented than their male counterparts. When it comes to money, ­higher-earning women may also work harder at being inclusive because they worry that their husbands will be unhappy in a nontraditional family role. Says Liza Mundy: “Female breadwinners are more likely to want to empower their husbands.”

That rings true for Roopal Carbo, 40, of Yorktown Heights, N.Y., a pharmacist whose husband, John, 41, is a stay-at-home dad to their three kids, ages 6 to 11. “My husband thinks that because I earn the money, I should decide where to spend it,” she says. “But just because I earn it doesn’t mean he’s not playing an important role in the family and that he doesn’t have just as much right to voice concerns.” John says it took him a few years to get comfortable offering his opinions on financial matters. “My wife still drives the major decisions, but now we discuss everything,” he says. “Each year we get better at this, and the conversations are easier to have.”

For greater harmony:

  • Play to your combined strengths. Sorry, guys, but when it comes to ­money, a joint approach typically trumps managing solo. Besides the fairness factor (income power shouldn’t automatically confer decision-making power), there’s a practical reason: Men and women, it’s been well documented, often have different but complementary financial skills that work better together than separately.

Men, for instance, are usually more willing to act when it comes to investing and planning and to take risks for greater gain. That works to temper women’s often expressed conservatism. Men are also prone to overconfidence, which can lead them to trade excessively, ultimately hurting their investment returns. Women are more patient, buy-and-hold investors and tend to thoroughly research each financial decision before they act. “Balancing your styles is ideal,” says psychologist Jonathan Rich.

Finding No. 3: Husbands are happiest when their wives earn as much or more.

Dan Saelinger; Styling by Dominique Baynes; Hair and Makeup by Amy Gillespie

The downsides of marriages in which women are the bigger breadwinner have been well catalogued in research and by the media. The husbands suffer from bruised egos and feelings of emasculation; the spouses fight more than other couples, have lousy sex lives, and are more prone to divorce.

The problem with these characterizations? They’re not necessarily accurate. The most publicized recent studies are based on data from couples interviewed during the early to mid-1990s, missing a generation’s worth of shifting expectations and experience when it comes to working women and marriage. In fact, the responses from the MONEY survey suggest unions in which women earn as much as or more than their husbands are at least as happy and as hot as marriages with a traditional earner relationship—and, in some cases, more.

Take marital satisfaction. Spouses in households where women earn as much as or more than men were as much in love as everyone else (six in 10 gave their relationship a five— “very much in love”—on a scale of one to five). They were a bit happier—83% were very or extremely happy, vs. 77% of families in which the wives earned nothing or less than their husbands. As for heat, marriages in which the partners earn roughly the same took the prize: They reported the best sex life, with 51% saying that their romantic encounters were “very good” or “hot,” vs. 43% of spouses overall.

What’s more, the most satisfied partners of all were the husbands in egalitarian and female-breadwinner marriages. For example, 56% of men wed to women who make as much as they do characterized their sex lives as “hot” or “very good,” vs. 43% with wives who made less. Men married to women who earn the same or more also expressed the greatest happiness with their relationship (see below). Psychologist Klontz theorizes that these husbands may be a self-selecting group: “Men who are attracted to higher-earning women probably desire more egalitarianism in their relationships.” For her part, sociologist Schwartz says her studies have also found a strong link between egalitarianism and sexual satisfaction.

The results of the MONEY survey may also reflect ongoing changes in men’s socialization and expectations, says Cohen at the University of Maryland. “Men are now being raised on the assumption that the woman is going to have a career, so there’s no shame that she ‘has’ to work,” he says. “They might not want their wife to make more, but they also might not care if she does.”

The tough economy of the past several years may also play a role. “We have found that it is burdensome for many men to have full responsibility for the family’s income,” says Ellen Galinsky, president of the Families and Work Institute. Andy Wen, 49, a music professor in Bryant, Ark., whose wife, Debra, 60, a special-education teacher, earns roughly the same salary, agrees. “Because neither of us is the main provider, there is no imbalance of power in our relationship, and it takes some of the pressure off both of us,” he says.

For greater harmony:

  • Emphasize the team, not the score. What’s driving satisfaction in more egalitarian marriages probably has less to do with who has the bigger W-2 and more to do with both partners feeling they are working in tandem to build their family’s security. Neither one carries the burden alone. Make financial togetherness easier by ensuring that all information is relayed jointly, suggests Manisha Thakor, co-author of Get Financially Naked: How to Talk Money With Your Honey. “If you have investments, for example, make sure both your names are copied on the trade confirmations,” she says. You can also set up your online banking accounts so that you each get the same alerts—say, when a deposit over a certain amount has posted to your account or a bill payment is due.

Finding No. 4: Female breadwinners are feeling the stress.

Not everything is peachy in marriages where women are the bigger breadwinners. Husbands in these relationships may be happier than most, but the wives? Well, not so much. Higher-­earning women are not as likely as other spouses to say they’re very much in love (58% say so—15 percentage points less than men married to higher earners). These wives worry considerably more about finances than men and lower-earning women do, and they are also more apt to identify money as an area of tension in their relationship (one particular sore point cited by nearly a quarter of these wives: their husband’s lack of career ambition).

What’s going on here? In a word, pressure. Many studies have documented the strain that working women feel juggling their jobs while having to keep up with their regular chores at home. Add the stress of being primarily responsible for the family’s income, and the reasons for female-breadwinner discontent don’t seem that difficult to fathom.

In fact, the MONEY survey tapped into this resentment: In marriages where the wife earns more, household chores rivaled money as the subject couples fight about most frequently, and arguments about grocery shopping, cooking, and taking out the garbage were more frequent than in homes with a male primary breadwinner. That’s true even though men in these relationships seemed to be doing considerably more around the house than their higher-earning counterparts, and female breadwinners were doing less than lower-earning women and stay-at-home wives.

Part of the problem, says San Diego psychologist and marriage counselor Jonathan Kramer, is perception. “Men often magnify the extent to which they’re doing chores at home,” he points out. Meanwhile, some wives may not recognize how much more their husbands are doing, especially if the guys do the cleaning, shopping, cooking, and child rearing differently than the woman would do them herself.

Whatever the reasons, women like Ashley Papke, 31, an office manager in St. Louis who makes almost twice as much as her attorney husband, Erik, 34, are feeling the weight keenly: “It’s a constant struggle to be the best at my job, the best mom, the best wife, the best financial planner for our lives, the best homeowner, the best coach,” she says. “Sometimes I feel like there is so much expected of me that I may just explode.” Though the Papkes theoretically divide financial-planning tasks, Ashley says she feels “more responsible” for the family’s financial success. “Erik is helpful, but since I earn more and worry more, I feel it’s on my shoulders,” she says.

For greater harmony:

  • Outsource what you can. Yes, a monthly or biweekly housecleaner, and takeout or prepared foods, can get expensive. Still, if you can afford at least a few time-and-energy savers without sacrificing important goals, go for it, says MONEY contributing editor Farnoosh Torabi, author of When She Makes More (check out an excerpt here). Harmony on the home front is worth something too.
  • Be appreciative. Ladies, your husband may not cook, clean, and take care of the kids as you would. When he takes on a task, though, you have less say in how it gets done and vice versa. Say “Thank you” and move on.

Finding No. 5: Spending is everyone’s hot-button issue.

Dan Saelinger; Styling by Dominique Baynes

No matter which spouse earns more, money has traditionally been the greatest source of friction for couples, and our survey found the same: Money is the topic that spouses argue about the most, ahead of household chores, spending quality time together, sex, snoring, in-laws, and what’s for dinner.

The most contentious issue was spending, with 46% of respondents citing frivolous purchases as the top cause of money fights. And both men and women think their partner is the one with the bad spending habit.

Still, the more wives contributed to the family income, the less an issue spending appears to be. That’s what Lisa Dieter, 33, a certified financial planner in Mettawa, Ill., learned when she swapped breadwinning roles with husband Matt Miller, 38. Until last year, when Miller launched an online dining guide business, he had earned about 70% of the household income as the manager of an online certification website. “I used to check with him first before making a big purchase,” says Lisa. “Now it’s my income, so I feel like I can make my own decisions. Before I felt like he had the final say. Now I do.”

For greater harmony:

  • Work off the facts. The majority of us marry our money opposites, says Scott Palmer, co-author with his wife, Bethany, of The 5 Money Personalities: Speaking the Same Love and Money Language. If you’re a worrier and saver, you may find it hard to understand why your free-spending spouse craves a pricey vacation—and she, in turn, may be frustrated by your claims that you can’t afford to take one. Remove the emotion from the discussion by looking at hard numbers to figure out whether your spouse’s spending is actually interfering with your ability to, say, build an adequate emergency fund or save for retirement. If so, discuss it, framing the conversation about the goal (a positive), not your partner’s errant ways.

Yet you may well find that, while you don’t see the value in what your spouse is buying, there’s no actual financial harm to your family in the purchases. As Bethany Palmer points out, judgments about spending go deeper than whether a couple can afford the purchases: “It’s really about having control and ownership of the money we make.”

  • Agree on a wish list. You and your spouse should separately jot down five to 10 things you want to spend money on, suggests Deborah Price, author of The Heart of Money, and then compare notes. “Where the items overlap is where you allocate your resources, putting most of the money in shared values,” she says. “Then negotiate the differences so that both people’s different needs are still met with any leftover discretionary income.”

Finding No. 6: We don’t agree on roles and goals.

Most couples think they’re on the same page when it comes to money, or so eight in 10 spouses in the MONEY survey said. Yet when it comes down to the particulars, not so much.

Asked to name their spouse’s greatest financial worry, for example, both sexes think their partner is more concerned with keeping up a certain lifestyle than most husbands and wives actually say they are. Women believe their husbands are more worried about losing their jobs than men say they are. And both sides underestimated how important the opposite sex rates goals such as emergency savings and paying off debt. Men were especially off base about women—only 42%, for instance, said their wives cared about having the right investments, vs. 64% of women who rated that as a top goal.

Spouses also don’t agree on who pays the bills, does the budgeting, or takes care of long-term planning. And each partner gives himself or herself more credit for everything from financial know-how to who worries more about money.

The disconnect can seem amusing, like a familiar plot from a TV sitcom—until you realize that being out of sync with your spouse can really get in the way of attaining your goals. As Klontz puts it: “If you’re not on the same starting line, there’s no way you can cross the finish line together.”

For greater harmony:

  • Get help, as needed. Frustrated by conflicting goals and styles? Sometimes a neutral third party can help—say, meeting with a financial adviser or attending a money seminar. After years of being at odds over money, Karl and Lucinda Harms, both 54, of West Liberty, Iowa, decided to jointly attend a financial-management workshop last year. “My wife is a budget person, I am not, and we weren’t on the same page about what to do with our money,” says Karl, a design draftsman. The course made them realize that getting out of debt was the top priority for them, and they devised a plan to achieve it, primarily by cutting back spending. “It was an eye-opening experience,” Karl says. “I wish we’d done it 30 years ago.”

Finding No. 7: Spouses aren’t coming clean with each other.

MONEY’s survey found that nearly a quarter of married people don’t tell their spouse about things they’ve bought. About the same number fib about cost—and expect that their spouse does the same. And about 6% of spouses even have a separate financial account that they don’t want their partner to know about.

Why so secretive? “The No. 1 reason we do this is because we want to avoid a fight,” says Klontz. “If your partner is really anxious about money, even a totally appropriate purchase can become a point of contention.” And in fact, the top reason spouses gave for their subterfuge, cited by 35%, was to avoid a lecture from their mate.

For greater harmony:

  • Allow for some money autonomy. You don’t have to justify your desire for the latest-model iPad or to opt for Laura Mercier over Maybelline. With your spouse, agree on a monthly amount that you’ll each put into separate accounts, to be used at your discretion. “Research has found that the happiest couples have a joint account for the essentials and then some discretionary money,” says Schwartz.

The system is working for Adam Hall, 31, a middle school band director, and his wife, Kristen, 25, an art teacher, who set aside $50 a month for each to spend, no questions asked. “We trust each other with our accounts, but it’s nice to have a little money of our own,” he says. “We both just wanted a little bit of financial freedom.”

Additional reporting by Kerri Anne Renzulli.


MONEY Economy

What’s Your Money State of Mind?

Money magazine's exclusive poll reveals both improved confidence and lingering anxiety about our financial well-being.

Money's exclusive survey reveals mixed emotions when it comes to our personal economy: We're feeling pretty good today, but worried about our prospects for the long run.

At first glance the Brough family of Dallas seems to have emerged from the tumultuous economic events of the past six years unscathed.

Sole earner Richard, 44, a project manager in software consulting, worked steadily throughout the financial crisis — even landing a new job that pays $45,000 a year more than his old one, which pushed his salary comfortably into six-figure territory. The value of the home he shares with wife Kelley, 46, and two of their four children (ranging in age from 15 to 27) has rebounded to pre-2007 levels, and so has his 401(k).

Yet five years after the official end of the downturn, Brough feels anything but confident about his finances.

“I’m more obsessed with security and worried about the future than I was during the recession,” he says. “Even though I was making less then, our money seemed to go further. I’m anxious about being able to pay for everything we need, anxious about our savings, anxious about staying out of debt.”

The results of MONEY’s new national survey of more than 1,000 Americans age 18 and older reveal that most people share Brough’s concerns: The Great Recession may be over, but a Great Insecurity seems to have emerged in its wake.

True, the majority of respondents acknowledge that their finances are better now than they have been in some time. About three-quarters report that their situation has stabilized or improved compared with a year ago; less than half felt that way when MONEY posed that question in 2009.

Indeed, in that earlier survey, only about 10% said they were doing better than the year before, vs. 30% now. And far fewer folks seem to feel as if they’re teetering at the edge of a financial cliff: Just 24% say their circumstances have gotten worse over the past year, vs. 51% in 2009.

Meanwhile, people are even more optimistic about the year ahead: Almost nine out of 10 expect that their finances will be the same or better 12 months from now.

Yet while the outlook for today and tomorrow has brightened, the day after tomorrow appears decidedly grayer. Six out of 10 respondents own up to being worried about their family’s long-term economic security, and even greater numbers register anxiety when getting down to specifics; they’re really worried about having enough money for retirement, how they’d manage if a financial emergency arose, whether safety net programs such as Social Security and Medicare will be intact when they need them, and how they’ll pay for health care.

Moreover, that undercurrent of anxiety cuts across virtually all groups: Young and old, men and women, married couples and singles, even the affluent — all shared the same concerns.

Related: How we feel about our finances

Some of the fretting may be the result of a lingering hangover from the financial crisis. “People are influenced by what is more recent and most vivid, and that is still the recession,” says behavioral finance expert Meir Statman, a professor at Santa Clara University in California. “We fear that what happened in 2008 will happen again.”

The current state of the economy is also cause for continuing concern. “The unemployment rate is still pretty high, and there are a lot of questions about what the government is going to do,” says Olivia S. Mitchell, a Wharton economics professor who has studied the impact of the financial crisis on U.S. households. “We’re in an environment of pervasive uncertainty that’s not going to go away for years.”

What is causing the most agita about our financial future — and why? How has that affected the way we manage money? And what are the best steps to alleviate our anxiety and move forward? The answers follow, along other insights from the 2014 Americans and Their Money survey.

We’ve regained some stability — and faith

When MONEY polled Americans about their finances in 2011 and 2009, the nation was hunkered down and wrestling with post-recession panic. Families had pulled back drastically on spending, postponed vacations and major purchases, and even curtailed giving to charity. People were deeply worried about losing their jobs or getting a pay cut, concerned about the eroding value of their homes, and anxious about big losses in the financial markets.

Five years ago, when asked whether they’d be better off putting money under the mattress or in stocks, half of the respondents chose the bed.

Now that home values and stock prices are up and unemployment is modestly down, a lot of that fear has abated. This year, for instance, 71% of those surveyed opted for stocks instead of the mattress. Folks are once again comfortable tuning out the daily movements of the market: Only about a third of those surveyed said they were laser focused on financial news, vs. two-thirds in 2009.

There’s also a greater willingness to stretch for risk: In the most recent poll just over half of Americans said it was more important to keep investments safe than to aim for a higher return. While that’s a substantial number, it’s down from 64% three years ago. In general, concerns about losing money in the market, declining home values, and being laid off have dropped to close to the bottom of the collective worry list.

Related: 5 ways to reduce your financial anxiety

Other signs bolster the notion that Americans are backing away from the financial bunker mentality that swept the nation after the recession. A Challenger, Gray & Christmas analysis of employment data, for instance, found that more Americans are quitting their jobs, reflecting growing confidence in their ability to find a better position elsewhere.

After years of relative frugality, Americans are loosening the purse strings a little. Sales of big-ticket items such as cars and new homes recently hit six-year highs, and the fourth quarter saw the largest quarterly increase in outstanding credit since before the recession.

Among those feeling calmer is Ralph Schmitt, 69, of Fortson, Ga., whose savings fell by a third in the crash.

When the recession arrived, Ralph, who had planned to retire in 2008, decided to postpone that step. He and his wife, Kathleen, did not sell any investments, however, and by late 2009, with their portfolio growing again, Ralph felt confident enough to quit for good.

“I was still worried about the uneven recovery and our retirement savings,” he admits, “but I believed in the resilience of the U.S. economy and the momentum of the stock rebound.”

Besides, he says, he and Kathleen, 67, who stopped working in 1993, felt they could live on less, having drastically cut back on their spending for travel, fine dining, and theater.

Today the Schmitts’ portfolio is back to where it was in 2007, and the couple have “kicked up” their spending accordingly. “I wanted to travel extensively with my wife while we still had our health,” says Ralph.

Good habits have held

We may be opening our wallets again, but that doesn’t mean we’ve abandoned the fiscally prudent practices adopted after the crash. Nearly three-quarters of those in the MONEY poll reported that over the past three years they’ve been cutting back on luxury purchases and eating at home more often — a modest drop from 2011, when consumers were still shell-shocked from the financial crisis, but a big increase from the 2009 survey.

Nearly six in 10 say they feel guilty about buying something they don’t need, virtually unchanged from three years ago. And six in 10 say they’re trying to beef up their emergency cushion, a huge jump from 2009, when less than a quarter said the same. Indeed, the national savings rate, while down from its post-crash peak, is now 4%, about where it’s been for much of the past three years and substantially above the 1% rate of the pre-crisis boom years.

Whether we’ll be able to maintain that restraint for good, however, is unclear. “We’re not back to a status quo environment that would allow you to make those kinds of judgments,” says Scott Hoyt, senior director of consumer economics at Moody’s. He thinks consumers will let loose eventually: “Underestimate the desire to spend at your own peril,” he says.

It’s particularly tough to assess the long-term trend while the recovery is still so uneven, notes Caroline Ratcliffe, a senior fellow at the Urban Institute, pointing out that some groups, such as high-income baby boomers and retirees whose wealth is tied to the stock market, are feeling more flush than others these days.

Jim Durkis says the improving economy has not changed his habits — yet. The government lawyer and his wife, Deborah, an elementary-school teacher, both 50, were looking to buy a bigger house near where they now live in Albuquerque but decided against the move when housing values in the area declined.

Since the recession, the family, which includes Jason, 22, and Kaja, 21, have switched insurance companies, delayed vacations, and cut cable — though they signed up again last summer after Deborah, a former-spender-turned-bargain-hunter, found a good deal.

Though both spouses are working and he has a solid pension plan, Durkis says he’s still focused on saving. “I’m not convinced there’s been a true recovery,” he says. “I’d rather have extra money, just in case.”

Additional reporting by Kerri Anne Renzulli.

Part 2 of Money magazine’s survey: The long term still looks uncertain

MONEY Economy

Americans Still Worried About Their Financial Future

Six out of 10 people surveyed by Money magazine own up to being worried about their family's long-term economic security.

Most Americans believe that the Great Recession is over, according to MONEY magazine's new national survey. But a Great Insecurity seems to have emerged in its wake.

Many of us are sticking to the good financial habits we adopted after the crash — a trend explored in Part 1 of this story. One reason for that: Once you look beyond the immediate future, optimism fades and it becomes clear that Americans remain deeply worried about their long-term economic prospects.

Consider: In the MONEY survey, nearly two-thirds of those earning less than $100,000 and roughly half of those making six figures said they were worried about their family’s economic security; roughly six in 10 Americans were anxious about how they would pay their health care costs.

The majority fell behind on their savings, given their stage of life, and almost three out of four were concerned that their money wouldn’t last through retirement. Other recent studies have found similar concerns: New research from the Consumer Federation of America, for instance, found that only a third of Americans feel prepared for their long-term financial future.

Why does the outlook seem so scary? Some experts think the events of the past six years have shaken the belief in our ability to accumulate wealth over the long haul.

“When the housing market fell, that really scared people,” says Michael Hurd, a senior researcher at Rand, who studied the effect of the recession on household finances. Hurd found that a decline in home values caused people to cut back on their spending more than a similar drop in the stock market.

In addition, the erosion of trust in our financial system will have a lasting effect, says Tyler Cowen, professor of economics at George Mason University.

“If you don’t believe that your environment will persist, you’re not willing to stake out plans,” Cowen notes. “For example, you won’t buy a home based on the premise that in five years you’ll be earning more money. The volatility of the stock market and the government shutdown have only made it harder.”

Speech pathologist Janel Butera, 47, is one who isn’t counting on anything. A divorced mom of two sons, ages 12 and 13, from Corona, Calif., Butera has made reducing spending and boosting savings a priority over the past five years. Out went the gym membership and vacations; packed lunches and day trips to the beach are the new norm.

“The economy as a whole — I don’t put a lot of faith in it,” she says. “I’m not counting on getting any retirement help, not even Social Security.”

Butera is proud that she’s managed to rebuild her finances after suffering the twin hits of divorce and the recession but is still anxious that she might one day become a burden to her boys. “I worry about them having to provide for me when I’m older,” she says.

Her concern is shared by many: In the MONEY poll, one in five Americans with children said they would probably need their kids’ financial support someday.

We’re living close to the edge

One reason we’re not feeling so hot: While our 401(k)s may be flush again, our emergency savings are not. Half of the respondents in the MONEY poll confessed to living paycheck to paycheck; roughly six in 10 felt they didn’t have enough money set aside for emergencies and didn’t think the family’s breadwinner would find it easy to get another job if laid off.

And almost all people, it seemed, felt like they’d need a higher income than they now earn to really be financially secure — even those who currently bring home a six-figure income. No wonder that anxiety about how we’d cope with a real financial emergency tied with concerns about outliving retirement savings as the most prevalent money worry.

In fact, money has gotten tighter for many lately. Household income, adjusted for inflation, has dipped 4.7% since the recession, economist Cowen points out.

One thing’s for sure: All this stress isn’t helping our love life. The MONEY poll found that finances are both the most frequent source of spats between couples and the cause of the most serious arguments — far ahead of the second-place finisher, household chores, and snoring, which came in third.

Edward Martinez of Tyler, Texas, is one of the many who are worried about not having an adequate cushion. Though Martinez, 44, made $140,000 working for a military contractor in Iraq after the recession, he now earns less than six figures as a technical specialist with the Smith County appraisal district.

He and his wife, Jennifer, 38, a professor at the University of Texas, have an 18-year-old daughter living at home and also help support Martinez’s 22-year-old daughter from his first marriage.

Right now the family has only about a month’s worth of savings, which could easily be wiped out by a run-of-the-mill financial emergency, Martinez acknowledges. He’s in the process of getting a pharmaceutical degree, which he hopes will boost his earning power a few years from now.

Like Martinez, many parents these days are helping grown kids, making it even harder to save. More than a third of the parents of children 22 and older in the MONEY survey are helping out at least one of their brood; of those, three in 10 are shelling out $5,000 or more a year. And that’s not likely to change anytime soon: In the survey, parents providing such support believed their adult child wouldn’t gain full independence until age 30; adult kids supported by a parent put that age at (gulp) 32.

The kids may be all right in the end after all

Such findings are in keeping with alarms many experts have sounded predicting that young adults would bear the most lasting scars from the Great Recession, just as the Depression had a lifelong impact on the way people who came of age at that time managed their money.

Certainly millennials have had a tough slog so far: The job market for this youngest generation of workers is grim (nearly half of those unemployed are under 34, a Demos study has found), and the average student-loan debt for recent college grads is $30,000.

Atlanta resident Courtney Clemons, 25, has a typical millennial story. The Georgia State University grad interned at a travel agency while in school and was hired there full-time after she got her degree. But her earnings, ranging from $25,000 to $35,000, depending on bonuses, aren’t enough for her to get by on her own. So her parents provide about $500 a month to cover her car and health insurance, cellphone bill, and some spending money. Contributing to the problem: She has $90,000 in student loans.

“The jobs you get after graduation aren’t conducive to living on your own,” she says. Morley Winograd, co-author of Millennial Momentum: How a New Generation Is Remaking America, agrees. “Millennials are a very economically stressed generation, and that stress will last for their lifetime,” he says.

Yet MONEY’s survey, among others, shows a more mixed picture. Today’s younger folks do seem at least as value-conscious as their elders, and maybe even more so: A greater percentage of millennials say they are eating at home these days than they were in 2011, for example, while the numbers had dropped slightly for the general population. And for now at least, younger investors also seem more nervous about the stock market, keeping a greater percentage of their portfolios in cash than older people do.

When it comes to other attitudes about spending and saving, however, millennials seem to be pretty much like everyone else. They are just as likely to covet new, innovative products. And they aren’t cutting back on luxury spending or postponing vacations with any greater frequency than their elders either. Nor do they place more importance on saving; almost everyone, young and old, affluent or not, says that saving money is more important to them now than it was a few years ago. And for all the lamentation about how dim the prospects are for this generation, younger folks are surprisingly upbeat about their future: The vast majority (86%) expect to live as well as or better than their parents.

For now, though, while millennials may be having difficulty leaving the nest, no one seems particularly unhappy about it.

“Boomers created a helicopter parenting style and went out of their way to be friends with their kids,” says Winograd. “Many are delighted to have their adult children home.” The kids apparently don’t mind either. A recent Pew study found that 78% of adults ages 25 to 34 who were staying with their parents said they were satisfied with their living arrangements.

Some experts believe this turn toward family may be one recession-induced change that truly lasts. Reality is causing more people to let go of the postwar expectation that living standards will naturally just keep getting better, says Stephanie Coontz, a professor of history and family studies at Evergreen State College in Olympia, Wash.

Many may end up caring less about keeping up with the Joneses and more about being with the people who matter the most to them as a result. And indeed, almost 80% of the respondents to the MONEY survey say spending time with family is more important than ever to them, an increase of 10 percentage points over the past five years.

Janel Butera is one of them. The speech pathologist and mom felt her financial situation was secure enough last year to cut back her workweek from five days to four, so she went for it. “Sure, I could use the money,” she says, “but spending time with my kids is more important.”

Additional reporting by Kerri Anne Renzulli.


MONEY retirement planning

Do Your Retirement Dreams Match Your Partner’s?

Your dream is nonstop travel; your spouse wants to stay put. You’d like to quit now; she’s not ready. Learn about eight retirement issues that can cause a rift, and how to get on the same page.

  • Where to live

    Thirty-four percent of retiring couples disagree about where or whether to move.

    According to a 2013 Hearts & Wallets survey, deciding where to settle down in retirement is one of the biggest areas of disconnect between couples. “Typically the question of where to live is wrapped up in bigger issues like the partners’ connection to the community and obligations to other family members,” says Catherine Frank, executive director of the Osher Lifelong Learning Institute in Asheville, N.C.

    Can’t agree on a location? Start with a compromise: a season or two renting in the area that one of you dreams of. If the rental works out, you might buy a second home, assuming you can truly afford it.

    Expect to pay about 1% of the home’s cost annually for maintenance, on top of insurance, utilities, and any homeowners association fees. And don’t forget to factor in the cost of transportation to and from the new property.

  • Part-time work

    Many employees suspect they’ll be happier if they don’t quit work cold-turkey, but few end up actually taking part-time jobs.

    In fact, only one-quarter of people ever work for pay in retirement, according to the Employee Benefit Research Institute. The benefit of downshifting to a part-time job you enjoy, however, is far greater than the extra spending money.

    Studying several hundred college professors who cut down their hours upon retiring but didn’t completely quit, researchers found that the greater the involvement in part-time work, the more likely the professors were satisfied with both their retirement and life in general.

    While you may like staying in the game, be aware that you’ll increase strife on the home front if you use your workload as an excuse to avoid taking out the garbage and picking up food at the grocery store. A separate study of retired physicians — 95% of them male — found that the increased time that the doctors spent on household chores in retirement was significantly associated with wives’ life satisfaction. Sometimes love is just about making dinner — and doing the dishes.

  • Staying healthy

    Health dips for both men and women in the first years of retirement, according to a study by University of Missouri sociology professor Angela Curl. The likely culprit: a decline in social connections and physical activity.

    You don’t need drastic measures to stay healthy. A daily 45-minute walk can improve your blood pressure and blood sugar levels, according to recent studies. Researchers have also found that you’ll be more likely to stick with the program if you’re paired with a buddy — say, the one you’re married to.

  • Family finances

    Spouses often end up splitting household responsibilities, but that can create big problems with money in retirement years. Only 43% of husbands, for example, are confident their wives can manage the family finances.

    Women share this lack of confidence, according to a 2013 Fidelity survey — a big problem, since they will likely outlive their husbands.

    “Men have tried to shelter women from those details,” says Boca Raton, Fla., planner Mari Adam. “But that ends up as a huge disservice.” Along with mundane details like account numbers and passwords, both of you should know all about your investments, savings, and insurance policies.

  • Syncing retirement

    How happy you are in retirement might depend on whether you and your partner stop working at the same time.

    University of Minnesota professor Phyllis Moen found that newly retired men were least satisfied when their wives kept working; wives with newly retired husbands also reported lower levels of marital satisfaction than those in two-income or two-retiree marriages.

    Fewer couples nowadays — especially those with multiyear age gaps — are willing or able to sync retirement. Many boomer women who temporarily exited the workforce when their kids were young are nearing their career peak, says Miriam Goodman, author of Too Much Togetherness: Surviving Retirement as a Couple — just as their husbands are ready to taper off.

    To get the timing right in your household, analyze the costs and benefits for each of you of staying in the workforce. Is one of you just shy of a pension? How big could your Social Security checks grow? Weigh those benefits against each spouse’s desire to retire.

    If you decide one of you should go first, start planning how the retired spouse will be occupied and what you’ll be doing together. “When one partner feels abandoned, that’s when resentment builds,” says Goodman. And take heart: Moen found that marital satisfaction rebounded a few years after both partners retired.

MONEY Health Care

Open Enrollment Season Is Here: Choose Your Plan Wisely

Despite the recent rollout of government-regulated insurance exchanges, employer-offered plans will be the most cost-effective option this year for the majority of workers.

Watch out for some big changes in your employee benefits this year.

One thing health reform hasn’t changed: If you work for a company that offers health insurance, you still have to go through the annual fall ritual of selecting next year’s benefits.

Despite the recent rollout of government-regulated insurance exchanges, employer-offered plans will be the most cost-effective option this year for the majority of workers, says Katy Votava, president of Goodcare, a firm that advises people on health care decisions.

But that doesn’t mean you should just stick with the same plan as last year. Companies have been tinkering with coverage in response to continued increases in health care costs and the expected impact of reform. (Sixty percent of employers say the new tax on high-cost health insurance will affect their plan design within the next two years, HR consulting firm Towers Watson reports).

The result, says Helen Darling of the nonprofit National Business Group on Health, is that “more of your money is at stake than ever.”

Read on to learn about the key trends that will shape your coverage in the coming year and to find out how they should shape your open-enrollment decisions now.

Costs for you are up again

Cover just yourself? While 38% of employers planned to decrease or keep steady employees’ premiums, 40% planned to increase workers’ tabs by up to five percentage points and 22% by five or more, Towers Watson found.

Even if your premiums don’t go up, your out-of-pocket cost is likely to be higher, as deductibles are expected to rise noticeably. “Last year, among large employers, there was a 13% increase in deductibles — one of the sharpest we’ve seen in a while,” says Beth Umland, a director of research at HR consultancy Mercer. “It seems like employers are using the deductible as a way to keep plan costs down.” In addition, she says, you could see higher co-pays to visit specialists.

What to do: Take time to compare plans, since your 2013 choice may no longer be the most cost-effective. Estimate your total expenses — premium, deductible, and co-pays or co-insurance — under each, based on this year’s usage.

Best case, your employer will offer a web tool that pre-populates your data. Be sure to check whether your doctors are in network and regular meds are covered on any new plan.

To ease the bite of increasing costs, take advantage of a flexible spending account. You can stash up to $2,500 pretax for medical expenses in one. In the 28% tax bracket, it takes $3,472 after-tax to pay for that amount of care.

Spouses get no love

Have dependents on your plan? “Employers want spouses or partners to consider any other coverage they might have,” says Craig Rosenberg, practice leader for benefits consultancy Aon Hewitt.

So some companies are requiring spouses that have the option of other coverage to take it. A few are excluding spouses altogether; UPS recently made headlines for doing so.

More commonly, companies are upping the price to insure partners, through spousal surcharges or by creating different rates for different combinations of family (employee, employee plus spouse, employee plus children, and so on).

About a third of firms are hiking premiums on family coverage five percentage points or more, vs. 22% doing so for singles, Towers Watson says. Also, family deductibles are going up at a higher rate than employee-only deductibles, Mercer reports. In sum, your out-of-pocket cost for family coverage could be two or three times what it was a few years ago, says Cynthia Weidner, a VP at health care consulting firm HighRoads.

What to do: Consider splitting up — your coverage, that is. If your spouse’s company also offers insurance and the premiums plus the deductibles for each of you going with your own employer add up to less than the premiums and deductibles for both of you on any single plan, you’ll probably do better diverging.

Families with kids should compare the cost of covering children first on one spouse’s plan, then the other spouse’s plan, then with full-family coverage on each plan.

High time for high deductible?

Now likely to be on tap from your employer: a high-deductible health plan — that is, one in which coverage doesn’t kick in until you’ve shelled out at least $1,250 for singles and $2,500 for families.

An HDHP is usually paired with a tax-advantaged health savings account into which you can sock away money for out-of-pocket costs. In 2014 individuals can contribute $3,300, and families $6,550; those over 55 can add another $1,000.

High-deductible plans are far cheaper for companies than HMOs and PPOs. So while only 11% of companies offered an HDHP in 2004, 66% will this year, Towers Watson says; another 13% are expecting to offer one next year. And though 85% of businesses offering HDHPs today present another option, nearly a quarter of companies plan to make this the only choice by 2016.

What to do: Use the tool at to see if an HDHP will save you money. Have young kids or a condition that requires you to see doctors often? Stick with a PPO or an HMO if you can, to minimize the cost per visit.

But if you and your spouse are healthy and don’t see doctors much, a high-deductible plan probably makes sense, says Darling. “This is especially true if your PPO has individual deductibles.”

Preventive services tend to be covered in full, and once you hit the deductible, coverage is like that of an HMO or a PPO. Also, nearly half of employers help fund employees’ accounts, says Towers Watson, and unused money rolls over year to year — so you could well end up ahead.

Proof of wellness required

Two-thirds of companies now offer financial rewards (typically cash or contributions to tax-advantaged accounts) to workers who fill out health questionnaires or undergo screening tests for conditions like high blood pressure. Recently, however, firms have begun implementing outcome-based incentives, meaning you have to prove you’ve changed a behavior — lost weight, say, or quit smoking — to score a reward.

Nearly half of employers say they’ll go this way by 2016, Towers Watson reports. Some firms even levy penalties, like higher insurance premiums, if workers don’t modify the behavior.

What to do: Take advantage of low-hanging fruit (filling out a form or taking a test), and seek help to make any changes required to reap awards. Ask your employer if there is a support group or counseling available.

More perks — at a price

Increasingly, firms are fleshing out open-enrollment packages with a variety of other benefits. Typically these are offered for purchase at a group rate. Most common: legal assistance (55% of large firms offer it, Towers Watson reports), financial counseling (44%), long-term-care insurance (36%), critical-care insurance (35%), and travel-accident insurance (30%). Some firms even offer concierge services that will, say, pick up your dry cleaning.

“Companies are thinking, ‘We’re reducing on health care. What could we offer instead?'” says Towers Watson health care practice leader Ron Fontanetta.

What to do: Assess each based on whether you’re likely to avail yourself of the service. The group rate should be significantly less than you’d pay on your own. So if you’re planning to, say, rewrite your will, the legal counseling may be worth the cost. Otherwise, skip the extras — and apply the money to your rising health care tab.

MONEY Health Care

Take the Pain Out of Work

Photo: Joshua Scott Your office setup may be the source of your aching back and painful wrists.

Your office space may be the cause of your aching back. Try these low-cost ergonomic solutions.

Is your job a pain in the neck? Of course it is.

That question is no joke, though, for anyone who suffers from serious shoulder, neck, wrist, or back discomfort at work. Repetitive-motion injuries hurt — both physically and financially.

Consider: The lifetime cost of carpal tunnel syndrome is about $30,000 per person, the National Institutes of Health reports.

Research also shows that people with bad backs rack up 60% more in medical bills than their healthier colleagues and that the average worker experiencing muscle, tendon, ligament, or bone pain (not including backaches) loses 5½ hours a week in productivity. Says Brad Hutchins, an ergonomist in Thousand Oaks, Calif.: “That can be just as costly as missing days in the office.”

You’re most at risk if you often work from home. Cornell ergonomics professor Alan Hedge found that at-home computer usage was the biggest predictor of a work-related strain injury, increasing the likelihood by 50%.

Notes Hedge: “Even full-time office workers now spend an average of six to eight hours a week working at home.”

Not in a position to blow $1,000 to $2,000 on an ergonomically correct desk chair? No worries. As the strategies below show, you don’t have to spend a lot to get relief.

Take advantage of free fixes. Be smarter about how you work, Hutchins advises.

To alleviate strain, stretch and walk for at least a minute or two every half-hour, change your posture frequently, and take periodic minute-long typing breaks during which you rest or stretch your fingers.

Also call your HR department to see if your company has an occupational health or ergonomics consultant — most large employers do — and ask to have your office setup evaluated, says Mary Tavarozzi, a director at Towers Watson.

If you have a regular work-at-home arrangement, your firm may also pick up part or all of the tab for a chair with better back support or for other ergonomically helpful office equipment.

Buy the right stuff. Company can’t help or you’re self-employed? Do it yourself by investing in equipment that helps keep your back, neck, and wrists in the proper position.

Focus on your computer, keyboard, and chair, which are at the root of most problems, says Raleigh, N.C., ergonomist Tim McGlothlin. Your monitor, for instance, should be high enough that your eye is in line with a point a few inches from the top of the screen. A basic stand costs only about $20.

For typing, your hands should rest at the same height as your elbows so your wrists stay flat, which typically isn’t possible if you use a laptop with an attached keyboard. Solution: Spring for an external keyboard and a tray mounted under your desk to house it.

You don’t have to shell out a grand or more for a special ergonomic chair, which won’t necessarily be any better than one that costs a third as much, says McGlothlin. What’s important is to get a chair with adjustable height and armrests and a backrest that supports your lower back (or has room to position a rolled-up towel at your belt line), so you can sit at a slightly reclined angle (chest back, head straight).

As for wrist rests, split keyboard trays, and forearm supports, skip ‘em, says Hedge: “Ninety percent of those ergonomic gadgets just aren’t that helpful.”

Let Uncle Sam help. Workers who are self-employed and claim a home-office deduction can write off work-related ergonomic equipment.

To claim a tax break when you work for a company, your total unreimbursed business expenses must exceed 2% of your adjusted gross income; then you can deduct the portion of your ergonomic purchases above that threshold.

Seeing a physical therapist to get some relief from neck and back strain? You can use your flexible spending account at work to fund your co-pays with pretax dollars; prescribed massage therapy qualifies too.

That will save you some cash — and make your workday a lot more pleasant.

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