MMI Omnibus Survey. Debt Survey. Top-Line Results and Suggested Story Lines

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1 MMI Omnibus Survey Debt Survey Top-Line Results and Suggested Story Lines Methodology: Cynapsus and MMI developed seven questions that were included in a nationwide, Web-based omnibus study. The survey questions focused on: How respondents and their families are handling debt compared to the US government How the current US debt crisis is affecting their personal financial situation How their credit card debt compares to the US average If they carry an unpaid balance on their card(s) How much of their household income goes toward paying debt How long they expect it to take to pay off their debt How long they expect the US government will take to pay off its debt The questions were finalized Aug. 11, 2011, and the omnibus was fielded for four days from Aug. 12 to Aug. 15. Results were available Tuesday, Aug. 16. The company conducting the omnibus, Russell Research, also provided detailed demographic data on all respondents. We planned for a total of 1,000 responses, and exceeded that goal with 1,034 completed surveys. The raw results were weighted by demographics so they are representative of the US population as a whole. Weighted results are reported here. Demographically, 51% of the respondents were women, 49% men. Their average age was 45, and most came from the South (36% vs. 23% Midwest, 19% Northeast, 22% West). 45% are married, 54% are not married (single-never married, divorced, separated, widowed, or living with someone). 49% work either full or part-time (48% men, 49% women), 17% are retired and 16% are unemployed. 15% of the women are homemakers. Findings [Note that only those differences that are statistically significant are reported here.] How Their Family is Handling Debt Compared to the US Government August 2011 Page 1 of 11 Cynapsus LLC

2 While four in ten respondents think their family is handling debt as well as the US government, significantly more said they were handling their debt better. And, only 14% thought their family was handling their debt worse. Although this may be influenced by recent events and the media coverage surrounding them, this appears to be a fairly harsh criticism of the US government s debt handling. Demographically: Better (8, 9, 10 Rating) 45% About the Same (4 7 rating) 41% Worse (1, 2, 3 Rating) 14% - Significantly more of those aged 55+ think they are doing a better job of managing debt than the US government (56% vs. an overall 45% by all respondents). This is even more pronounced for males 55+, where 65% responded this way. - Significantly more of those with household incomes of $50,000 or more (54%), those with college educations, people who are married, and those with no children (49% each), also think they manage their debt better. - Not surprisingly, many more Republicans think this way (62% vs. 40% of Democrats and 52% of Independents) as do Caucasians (50% vs. 30% of African Americans and 38% of Hispanics) and homeowners (52% vs. 38% of renters). Prior MMI survey results on spending and debt since 2008 have shown that almost half of respondents began managing their finances better by spending less. By contrast, US government spending has grown by 36% from $2.8 trillion in 2008 to an estimated $3.8 trillion in 2011 according to the US Office of Management and Budget. In a June 2008 survey we asked what respondents were doing to prepare for long-term financial hardship. In that survey, 68% said they were cutting back on luxury items, and 43% said they were paying down debt. In a 2006 Love & Money survey conducted before the current economic crisis, we found that 61% of respondents who were unhappy in a relationship said it was a result of financial issues. In that same survey, 40% of respondents rated low debt level as highly important in a relationship. A fifth said that lack of a low debt level would be a deal-breaker in a relationship. Additionally, 70% said that being financial savvy is an important trait in a relationship partner. Combined, these findings have major implications for Americans attitudes toward the US government s current financial policies and practices and they are not good. This seems to be August 2011 Page 2 of 11 Cynapsus LLC

3 reflected in current political discussions and could lead to some interesting results in the 2012 elections. The Impact of the Current Debt Crisis on Personal Finances When asked what the impact the current US debt crisis is having on their personal finances, respondents cited spending habits as most impacted. Savings, investing, and plans for retiring were negatively impacted, with 39%, 38%, and 37% saying they d do less or move retirement plans back. 10% Plans for retirement 53% 37% 11% Investing Saving habits 25% 38% 36% 39% 51% Higher/Earlier No Change Lower/Later 14% Spending habits 28% 58% Demographically: - More women plan to spend less than men (62% vs. 54%), and save less (42% vs. 35%). - More respondents in the South and West (62% and 61% vs. 56% in the Northeast and 51% in the Midwest) and more with college degrees (61%) plan to spend less than those in other areas. - More respondents under 35 plan to spend more and save more (24% and 43%) compared to respondents More of those with college educations plan to spend less compared to those without a degree (61% vs. 53%); but more of those with no degree plan to save less (45% vs. 36%). - When it comes to investing, more of those younger than 35 plan to invest more (18% vs. 11% overall). - In terms of retirement plans, more of those in the middle-aged group (35-54) plan to retire later (42% vs. 37% overall) as do more in the Northeast (42%) and Midwest (43%). Household s Credit Card Debt Compared to the National Average August 2011 Page 3 of 11 Cynapsus LLC

4 Credit card debt is currently averaging almost $16,000 per household. This figure is calculated by dividing the total revolving debt in the U.S. ($793.1 billion as of May 2011 data, as listed in the Federal Reserve's July 2011 report on consumer credit) by the estimated number of households carrying credit card debt (50.2 million). Nearly half of the respondents said their credit card debt is less than the national average. And, 37% said they have no credit card debt. Demographically, more of those in the following groups said they had no credit card debt: I don't have credit 37% card debt Less 47% More 15% - Those with no college education (47% vs. 33% with a degree) - Singles (42% vs. 31% for marrieds) - Those in single-person households (46% vs. 36% with households of 2 or more people) - People who are unemployed (43% vs. 37% of those who are working) - Republicans (40% vs. 31% of Democrats and 30% of Independents) But, Westerners reported that they had more credit card debt compared to the national average than those in other areas of the country (21% vs. 9% of Midwesterners, and 15% each of those from the Northeast and South). This may be a result of this area of the country being especially hard hit by the housing bubble and being underwater on their mortgages. Households Carrying an Unpaid Credit Card Balance Although roughly 4 in 10 respondents said that they carry an unpaid balance on their credit cards, 29% said they don t have any credit cards. Don't have any credit cards 29% Pay credit card balance(s) off in full every month 28% Carry unpaid balance 43% August 2011 Page 4 of 11 Cynapsus LLC

5 In a February 2010 survey for CreditCards.com, 29% said they did not have any credit cards. And in a recent Consumer Reports survey, one-third of Americans reportedly do not own a credit card, confirming these findings. Demographically, more of the following groups carry a credit card unpaid balance (compared to 43% overall): - Women (47% vs. 39% of men) - Those with annual household incomes of $50,000 or more (50% vs. 41% with lower incomes) - College educated (47% vs. 34% without a degree) - Married (50% vs. 37% of singles) - Larger families 3 or more people in their households (45% vs. 36% of those in singleperson households) - Employed (52% vs. 35% of those not employed) - Democrats (50% vs. 41% of Republicans, 45% of Independents) Those more likely to pay off their credit cards each month include: - Men (32% vs. 24% of women) - Those aged 55+ (36% vs. 24% of those 18-54) - People who live in the Northeast (34% vs. 27% or fewer in other regions) - Those with annual household incomes of $50,000 or more (37% vs. 21% with lower incomes) - Republicans (38%) and Independents (33%) vs. Democrats (24%) - Homeowners (35%) compared to renters (18%) The largest numbers of those saying they have no credit cards include: - Respondents under 55 (33% vs. 21% 55+) - Midwesterners (36% vs. 30% or fewer in other areas) - Those with annual household incomes under $50,000 (38% vs. 13% with higher incomes) - People without a college education (42% vs. 23% with degrees) - Singles (36% vs. 21% of those married) - People who are not employed (35% vs. 23% of those working) - African-Americans (37% vs. 33% of Hispanics and 27% of Caucasians) - Renters (40% vs. 17% of homeowners) What we don t know is whether these findings are a result of a choice not to have credit cards, or an inability to qualify for credit. Percentage of Household Income that Goes Toward Paying Debt August 2011 Page 5 of 11 Cynapsus LLC

6 Compared to a national average of 16% of household income that goes toward paying debt (Source: Federal Reserve Household Debt Service and Financial Obligations Ratios), these respondents appear to be on the high side at a conservative weighted average of 19%. This weighted average was calculated using 41% as the high point, which may be on the low side. Usin g 50% as the high point, it s 21%. I don't have any debt 21% 1 10% 19% 11 25% 23% 26 40% 16% 40% or more 21% Demographically, more of the following groups reported that 40% or more of their income is dedicated to paying off debt: - Women (24% vs. 18% of men) - Those years old (24% vs. 18% of those under 35 and 19% of those 55+) - Households with children (24% vs. 19% of households with no children) Length of Time to Eliminate Household Debt On average, among those with debt, the expectation is that it will take 4 years to pay that debt off. More than 5 years 35% 3 5 years 24% 1 2 years 23% Less than 1 year 18% Demographically, there were more in the following groups who expect to need more than 5 years to eliminate their debt: August 2011 Page 6 of 11 Cynapsus LLC

7 years old (44% vs. 35% of those 55+ and 23% of those under 35) - Residents of the Northeast and Midwest (43% and 42% respectively vs. 30% and 28% for those in the South and West) - Caucasians (37% vs. 29% of African-Americans and 27% of Hispanics) Length of Time Estimated It Will Take the US Government to Eliminate Its Debt Respondents were far more pessimistic about the government s ability to pay off its debts in a timely fashion. Over 80% said either way more than 5 years or never. This may be a reflection of the amount of the debt somewhere in the neighborhood of $14 trillion but may also be a result of a number of widely circulated calculations that put the US debt into a perspective that consumers can relate to. One of these came from Dave Ramsey: "If the US Government was a family, they would be making $58,000 a year, they spend $75,000 a year, & are $327,000 in credit card debt. They are currently proposing BIG spending cuts to reduce their spending to $72,000 a year. These are the actual proportions of the federal budget & debt, reduced to a level that we can understand." August 2011 Page 7 of 11 Cynapsus LLC

8 Never Way more than 5 years 41% 41% More than 5 years 11% 3 5 years 5% 1 2 years Less than 1 year 0% 2% Demographically, there were more of the following groups who expect that the US government will never pay off its debt: - Those 55+ (49%) and year old respondents (44%) vs. 28% of those under 35 - People in smaller households (47% in single-person households, 43% with 2 people, 37% in households of 3 people or more) - Caucasians (44%) and Hispanics (38%) compared to African-Americans (24%) - Republicans (50% vs. 33% of Democrats and 39% of Independents) In addition, more of those with college educations said more than 5 years (44% vs. 35% with no degree). August 2011 Page 8 of 11 Cynapsus LLC

9 Suggested Story Lines Debt Survey Maybe it s time the people took over. Almost half of Americans believe they are doing better than the US government at managing debt. Less than 20% think they are handling their own debt worse. Look to the old guys for help for the national debt crisis. Nearly 7 in 10 men over 55 in a recent MMI survey think they re doing a better job of managing their personal debt than the US government is doing. The Democrats may be in for a rough ride next year. In a recent MMI survey, 62% of Republicans think they are doing a better job of managing their own debt compared to the US government. Only 40% of Democrats felt that way. And, the Independents are in the middle at 52%. Previous MMI surveys have shown that Americans have learned to manage their finances when things are tight by spending less. Nearly half of those in a recent survey think they are doing a better job of managing their debt than the US government is. In a previous MMI survey, 7 in 10 Americans said that they cut back on luxury items and 4 in 10 said they were paying down debt. But now, they do not think the US government is doing as well as they almost a majority think they are doing a better job of managing their personal debt than the US government is. In a previous MMI survey, 6 in 10 respondents who were unhappy in a relationship attributed their unhappiness to financial issues. A large and growing US government debt, combined with results of a recent survey that shows Americans think they are doing a better job of managing their debt than the government is, Washington should be looking much harder at their plans or risk being removed from the relationship. The current debt crisis is having ripple effects on the US economy. In a recent MMI survey, nearly 6 in 10 Americans report that they re spending less. The current debt crisis is having a positive effect on consumer savings for some people. One quarter of Americans report that they re saving more. The current debt crisis is not affecting some Americans retirement plans and their investing. A majority report that neither their retirement plans nor their investing have changed. The current debt crisis is having a negative effect on some Americans plans. In a recent MMI survey, nearly 4 in 10 Americans report that they re planning for a later retirement, and an equal number say they are investing less. Aside from increasing savings, most Americans in a recent MMI survey said they are not planning to retire earlier, invest more, or spend more given the current debt crisis. The economies in the South and the West may be affected more by the current debt crisis. In a recent MMI survey, almost a fifth of Americans in those areas plan to spend less than people in other areas. Gen Xers are getting hit hard by the current economic situation. In a recent MMI survey, over 10% more are pushing back their retirement plans compared to Gen Ys or Baby Boomers. There s good news and there s better news it looks like people are finally learning to deal better with credit cards. In a recent MMI survey, almost 4 in 10 Americans said they have no credit card debt. And, an additional 5 in 10 think they are currently carrying less than the national average. August 2011 Page 9 of 11 Cynapsus LLC

10 More Republicans have shed their bad credit card habits. In a recent MMI survey, 4 in 10 Republicans said they have no credit card debt compared to only 3 in 10 Democrats and Independents. Is the current Democratic leadership mirroring their party members or vice-versa? In a recent MMI survey, a third fewer Democrats reported having no credit card debt compared to Republicans. Are Americans breaking their bad credit card habits? In a recent MMI survey, 30% of respondents said they don t have any credit cards. And, an equal number pay off their balance every month. Many more women and Democrats have credit card balances compared to men and Republicans. In both cases, nearly 5 in 10 have unpaid balances on their cards compared to 4 in 10. Rich or poor, it s good to have money. In a recent MMI survey, nearly 4 in 10 people with higher household incomes (over $50,000) pay off their credit cards every month compared to 2 in 10 with lower incomes. And, nearly 4 in 10 of those higher income respondents have no credit cards compared to only 13% in the lower income groups. Who says you need a degree to be smart? In a recent MMI survey, 4 in 10 people without a degree have no credit cards compared to a quarter of those with a college education. For many Americans, a significant proportion of their income goes toward paying down debt. In a recent MMI survey, a fifth said that 40% or more of their household income goes to debt reduction. And, Gen Xers and families with children are being hit disproportionately more. On average, roughly 20% of an American s income is paying down debt. Americans with debt expect that it will take 4 years to pay it down. By contrast, 80% of respondents in a recent MMI survey expect that the US government will need way more than 5 years or that we ll never pay down the US debt. The most pessimistic or realistic Americans who think the US government will never pay down its debt are people over 55. August 2011 Page 10 of 11 Cynapsus LLC

11 Survey Questions: Debt Survey 1. On a scale of 1-10, where 1 is much worse and 10 is much better, how well is your family handling debt compared to our leaders in Washington DC? 2. What has been the impact of the current US debt crisis on: Lower/Later Higher/Earlier No Change a. Your spending habits ( ) ( ) ( ) b. Your savings habits ( ) ( ) ( ) c. Your investing ( ) ( ) ( ) d. Your plans for retirement ( ) ( ) ( ) 3. How does your household s credit card debt compare to the national average of nearly $16,000? a. More b. Less c. I don t have credit card debt 4. Do you carry an unpaid balance from month to month on any of your credit cards? a. Yes b. No, I pay my credit card balance(s) off in full every month c. I don t have any credit cards 5. What percentage of your household income goes towards paying debt (credit card payments, revolving payments for big ticket items like furniture, mortgage payments, student loans, etc.)? a. 1-10% b % c % d. 40% or more e. I don t have any debts! [Skip to Q.7.] 6. How long do you estimate your debt will take to eliminate? a. Less than 1 year b. 1-2 years c. 3-5 years d. More than 5 years 7. The current US debt is roughly $14.5 trillion. How long do you think it will take the government to eliminate that debt? a. Less than 1 year b. 1-2 years c. 3-5 years d. More than 5 years e. Way more than 5 years f. Never August 2011 Page 11 of 11 Cynapsus LLC