State of Americans’ personal finances offers some reasons for optimism

The stock market has come back, companies are starting to hire again, and economists are increasingly upbeat about the future. But unemployment remains stuck at more than 9 percent, home prices are falling, and the pace of foreclosures is accelerating.

One positive dividend from the hard times: Many have learned to be more conservative in their money habits.

Here’s a look at where our personal finances stand in several key areas:

SAVINGS — The good: The personal savings rate — the amount of disposable income unspent — stands at 5.3 percent. Although that’s a far cry from the 10 percent saved in 1985, it’s a vast improvement from 2006 and 2007, when the rate turned negative for the first time since the Great Depression.

The bad: Any further increase in the savings rate could stall the recovery, as consumer spending accounts for about 70 percent of the economy. It’s called the “paradox of thrift’’: Saving money is good for individuals but can be bad for the overall economy if everyone stops spending.

The outlook: The savings rate is likely to fall as the employment and economic outlooks brighten, but not dramatically.

DEBT — The good: Debt is down. Households on average owe about $43,000. That accounts for 122 percent of disposable income, down from a peak of 135 percent in late 2007, according to the most recent Federal Reserve data.

Credit card debt has decreased every month since August 2008. This reflects consumers paying down balances and card companies tightening lending standards and cutting available credit.

The bad: Tightened lending standards means it’s still difficult for many people to borrow money.

The outlook: Credit card issuers are expected to start mailing out more offers this year as the economy improves, said one observer. But consumers with average or poor credit scores will still have difficulty getting approved.

RETIREMENT/INVESTMENTS — The good: The stock market has roared back. As a result, 88 percent of 401(k) account holders now have larger balances than at the market peak, according to the Employee Benefit Research Institute — thanks partly to their continuing contributions.

The bad: Retirement security has been compromised for millions. Many pulled out of stocks only to earn minimal returns on cash investments. Still more investors approaching retirement remain below where they were three years ago.

The outlook: For those nearing retirement and need to boost their financial security, there are a handful of basic options: spend less, save more, delay accessing Social Security and retirement accounts, and work longer.

Dave Carpenter writes about personal finance for the Associated Press.