Many Nevadans are living on the edge financially, borrowing from payday lenders and setting aside nothing for a "rainy day," a national study showed Wednesday.
Yet, Nevadans have financial capabilities comparable to the average American in many ways, according to the FINRA Investor Education Foundation study.
The FINRA Foundation, which is affiliated with the Financial Industry Regulatory Authority, found that 56 percent of Nevadans live paycheck-to-paycheck, slightly more than the 55 percent of all Americans report doing so.
About 20 percent of Nevadans spend more than their income, the same as nationally, according to the survey.
With Nevada leading the nation with 14.2 percent unemployment, it's understandable that 50 percent of the state's population experienced an unexpectedly large drop in income over the last year, compared with 40 percent nationally.
While 60 percent of Americans have no rainy-day savings, 65 percent of Nevadans lack an emergency fund, according to the study.
Many financial advisers recommend individuals keep three to six months of income in savings, said John Gannon, president of the FINRA Foundation, said in an interview Wednesday.
Even a small amount, such as $200, can enable an individual to pay for a car repair without resorting to a high-rate payday loan, he said.
The survey showed that over the last five years 17 percent of Nevadans took out a payday loan, a short-term loan paid with the next wage check, or borrowed through a pawn shop, he said.
About 32 percent of Nevadans relied on nontraditional, nonbank loans, which also include rent-to-own spending and loans for income tax refunds, over the last five years, but only 24 percent nationally did so, the survey reported.
Despite the high rates, "I think people like the simplicity (of payday loans)," said Brad Beal, chief executive officer of Nevada Federal Credit Union.
Borrowers can quickly and easily borrow money without any planning and pay back the amount owed the next payday, he said.
A few years ago, many Nevadans used their home equity as a savings bank, Beal said. They would run up debt on credit cards and refinance their home loans so they could pay off the credit cards. Then, they repeated the cycle. With the drop in home values in recent years, homeowners no longer have equity they can tap for loans, he said.
Over the last 18 months, Beal has seen members become more prudent in their financial affairs.
"People are realizing with the recession that they have to live within their means," he said.
Beal suggested that a new survey would show different results, because of the change in consumer attitude about personal finances.
The survey was conducted in summer 2009.
"Since that time, we have seen data that the savings rate has increased although it has fluctuated," Gannon said.
Financial capabilities tend to be better among better-educated individuals with more than $70,000 in annual income, Gannon said.
A local wealth manager said his clients handle their money well.
"United Capital's clients generally have an understanding of their financial position and what it means to them," Robert Davenport, managing director of United Capital of Las Vegas, said in an e-mail.
Residents of New York, New Jersey and New Hampshire are the most fiscally responsible in the country, according to the study. Kentucky and Montana citizens ranked at the bottom in financial capability.
About 28,000 individuals were interviewed for the survey.
Contact reporter John G. Edwards at firstname.lastname@example.org or 702-383-0420.