About Robert Peterman
In a September 2023 interview, Primerica CEO Glenn Williams discussed the company's newly created Household Budget Index, which measures the purchasing power of middle-income families. Williams stated that the index was developed to provide more precise data on purchasing power beyond perceptions. He noted that while inflation costs have increased, purchasing power is improving because earned incomes are also rising. Williams pointed out that in June 2022, the index fell to 85, representing a significant loss of purchasing power in a short period, and that middle-income families have been deficit spending, drawing from savings to cover expenses.
Williams described the current financial situation for middle-income families as fragile, stating that they have a substantial gap to close to return to previous purchasing power levels. He emphasized that families need to prioritize paying down debt, particularly credit card debt with high interest rates, and that resolving these financial challenges requires a systematic, long-term approach. Williams added that the most important factor for recovery is wage growth through the labor market, but cautioned that the next six to twelve months remain a precarious period for these families.
Source: AI-verified profile updated from Robert Peterman's recent appearances.
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Transcript (11 segments)
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Host0:01
Inaugural Household Budget Index with Glen Evans. Good to see you again.
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Glen Evans0:08
Good to be back with you.
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Host0:10
What prompted you? It's like the Misery Index, but almost like on a micro level.
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Glen Evans0:15
It is. We have had good success with our Financial Security Monitor that you and I have discussed before, which each quarter gives us insight into the financial attitudes and perception of middle-income families. But we felt we needed something that was more precise regarding the purchasing power to serve them well and give them advice. So along with our economists and consultants, we created the Household Budget Index, which measures purchasing power. She was on the math behind the perception, and it does tell a very interesting story. It tells that there was some good news as it appears that there was an increase in cost. As we know, inflation is starting to ease a little bit, and it's going up, but not as fast, and purchasing power is improving because our earned incomes are increasing. At the same time, it's been quite a roller coaster ride, and they've got a lot of ground to make up.
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Host1:04
This is indexed to the year 2019 for the hundred level. There you can see January 2019 was kind of the starting point. Things got a little bit better as pandemic stimulus hit, and then they got a lot worse. June 2022 is the month that gasoline prices peaked and the CPI rate peaked, and the Household Budget Index fell all the way down to 85. A loss of years worth of purchasing power in a few short months.
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Glen Evans1:31
That's exactly right, and it has begun to climb back below 100. Several things to keep in mind: it's the monthly measure of purchasing power, so when you get a hundred, it just means you broke even in that month. When you work backward, in July, middle-income families have been deficit spending, which means you have taken money from savings, which can hurt your retirement years, and they bridge the gap with interest rates very likely in the plus range. We have to get well behind a hundred to fill in the hole. The other view we should take a look at is middle-income families were at 119 more than four and a half years ago. Their expectation was not to be back at a hundred four and a half years later. If you put a trend line on the graph, you would probably say the expectations would be at 110%. We have quite a way to go to where we need to be with the families.
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Host2:30
What does that tell you about the loss of purchasing power? I found the comment from Macy's that all of a sudden they're seeing a spike in delinquencies. What do you think is going on here?
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Glen Evans2:43
I think it tells us that we have to be careful when things begin to normalize and not to underestimate the damage that has been done. That's what we see as we sit with the families and try to provide financial guidance for them. They've got a big hole to fill, or they've got a lot of debt to pay off. They've got to make progress in earned income to make up the lost time, and there is a gap there of multiple years. This is almost lost time, particularly for retirement savings.
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Host3:10
I know you guys offer different kinds of life insurance and investment products. Is there a pitch here that you can do something to help them fill that gap, or is it just a stark realization of the base that the customer's shape is in?
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Glen Evans3:28
The first step is to acknowledge how significant it is. Then we help the families with budgeting, which is a reprioritization of the budget: giving up something of value today to gain something of greater value tomorrow. So it starts with reprioritization and saving for the future systematically. It's not a one-trick solution. It's something that takes as much or more time to resolve as it took to create the challenge. So it's a systematic long-term process that we use to help guide these families.
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Host4:04
A part in common on this would be, as you said, the biggest, most important thing you could make up some ground is through wages and the labor market. There have been some good signs in that lately when you look at when you were able to negotiate that kind of thing. In the next six to 12 months, this is not a good starting point. It's a fragile place for these families to be, and they have to first attack the debt crisis, which would go back to the credit card discussion you were just mentioning. The first thing families have to do is work very hard to pay off that debt, particularly with unfriendly interest rates, so that they get back to even.
