Living On Fumes: Who Is Favoring The Privilege Of Debt Over Equity?
Depending on who you ask, you will get different answers about which consumers’ behavior drove the credit crisis.
Was it the boomers and their “I want it now” ways? Was it Gen Y and their lack of understanding about how money works? Was it Gen X scaring the life out of everyone by sounding the alarms? And the veterans? Not on your life!
Source: FDU Magazine Winter/Spring 2005 “Mixing and Managing Four Generations of Employees,” Greg Hammill
The truth is, you will find people who use and abuse credit differently no matter what generation they are in. I know Gen Yers who are great savers, veterans who are living on credit, and boomers who are not afraid to be caught dead driving used cars. But the bottom line is that too many, regardless of segment, were/are confusing their credit lines with cash.
Plastic Beats Brick
A recent Iconowatch study showed that there is a new, emerging hierarchy that 30-plus percent of Americans are following when they pay their bills. They are paying credit cards first, mortgages second. That makes risk-averse individuals’ hair stand on end (regardless of the color or density), and for the more adventurous, it’s the way to sustain emergency funds in an economy where unemployment is high and credit comes at a premium.
Don’t Judge A FICO By Its Cover
Ironically, the heaviest users of the “plastic first mortgage second” technique have the lowest credit scores. And that’s not always generationally determined. Slower moving financial services companies are mired in the trap of using generational distinctions to determine financial behaviors. Smarter companies are developing techniques to identify the attitudinal segment that’s being missed.
One may assume that Gen Y is not a market for investing because they either don’t have enough money or they can’t get out of their own way. Or that people over the age of 65 aren’t in need of better management of their debts and cash flow. Or that people without kids don’t want life insurance. How does one go about discovering profitable new risks and products that people can’t yet articulate?
Gathering insights is the starting point, followed by identifying segments clearly and actionably. Companies need the ability to see though generalizations and find opportunities that others cannot see, yet it’s hard for those very close to the data. Sometimes all it takes is a fresh set of eyes to find them.