Times Call For New Approach

OCEAN CITY – Americans take pride in their ability to come back from adversity. That’s fortunate, because our resiliency has been sorely tested over the past couple of years by what is now being called the Great Recession. Many of the positive economic conditions we long took for granted have turned out not to have guarantees.

Growth is no longer a given. Credit is harder to come by. Retiree benefits may be in long-term danger. Still, there is a growing number of economists who take the position that financial calamity was averted and that we now seem to be back on a slow but steady path to fiscal health — what Ethan Harris, head of Developed Markets Economics Research at BofA Merrill Lynch Global Research, refers to as "a slow healing process."

But not with the easy optimism of before. Americans today are taking stock of the postrecession economic landscape and cautiously moving ahead. In a more uncertain environment, they’re focused on seeking solid advice for questions about their financial needs — whether it’s a matter of paying for a child’s college education, handling the fallout from a personal health crisis or working to rebuild a retirement account.

There’s no question that the changes of the past few years have made a real difference in the way families plan for the future and look at money.

"Risk aversion is quite strong in the American household," notes Ash Rajan, head of Investment Policy, Investment Management and Guidance for Merrill Lynch.

With unemployment remaining stubbornly high, many Americans have not regained confidence in the stability of their jobs and their income, while lingering portfolio losses and a still-sluggish real estate market have them brainstorming ways to hold the line on their net worth. And with the exit of easy credit, having enough for today has become a priority for many people.

"The American family is in a savings and deleveraging mode," says Rajan. "They are trying to reduce debt and spending while they wait for the economy and housing markets to repair themselves."

In other words, families are becoming more conservative about their budgets and investments. But they are also thinking more "big picture" than ever, considering ways to plan many decades into the future.

(A Merrill Lynch Wealth Management Advisor. She can be reached at 410-213-8520.)