Laura Rowley Money & Happiness

A new survey by Yahoo! Finance and Decipher Inc. finds that the vast majority of Americans are suffering from high anxiety about the broader economy and personal financial issues ranging from job insecurity to soaring food and energy prices to consumer debt.

A Catalog of Fears

Decipher polled 2,000 adults about their financial anxieties earlier this month. Among the findings:

• The rising cost of living is the No. 1 concern. Nearly two-thirds of respondents said they were "very worried" about inflation, and another 30 percent were "somewhat worried." Nearly three-quarters were concerned that their salaries won't keep up with rising costs, including food and gasoline; half of those polled expressed similar concerns about health-care costs. And more than a third said they were somewhat or very worried because their rent consumes at least half their household income.

• Consumers are also fearful about the economic downturn and job insecurity. Eighty-eight percent are worried about recession; 38 percent are concerned about being laid off from their jobs. Nearly two-thirds are worried about the stock market decline.

• Consumer debt is a significant trouble spot. Among the two-thirds of respondents who carry revolving credit card debt, 63 percent were worried they have too much. Among people with student loan debt, 55 percent are troubled by the amount they carry; among consumers with outstanding medical bills, half say they are worried they can't pay them. And 40 percent of homeowners with a home equity loan or line of credit are anxious that they can't afford the payments.

• The housing crisis is causing distress. Among homeowners, one-quarter were somewhat or very worried that they may be foreclosed on; 45 percent are concerned that rising property taxes could force them from their homes; and half are anxious because their homes require basic maintenance or repairs they can't afford. More than half are worried about falling home prices and their homes losing value.

• Consumers are anxious about savings. Some 58 percent are somewhat or very worried because they have nothing saved for retirement and can't afford to save -- the figure was 70 percent among people age 31 to 50. More than one-third are worried because they have nothing saved for college.

Reason to Be Nervous

In his new book "High Wire: The Precarious Financial Lives of American Families," Peter Gosselin argues that the burgeoning sense of financial insecurity is more than "a nation of whiners" in a "mental recession," as former senator Phil Gramm put it earlier this month.

"There is plenty of evidence that objective circumstances are causing Americans to report the kind of things in the survey," says Gosselin, a Los Angeles Times economics reporter. "They were there before we got in the current mess, and people have plenty of objective reasons to be nervous now."

Safety nets that supported working families in previous generations -- employer-provided health benefits, affordable housing, college and retirement savings -- have steadily eroded, Gosselin explains.

"Many of risks have been handed over in ways that people didn't notice, and requires them to do jobs that are spectacularly complex," explains Gosselin. "We need to be our own investment bankers for retirement and college savings, insurance brokers to understand our homeowners' policies, and lawyers to understand all the documents that get handed to us. It's not that we can't do these jobs -- but people have lives to lead and don't do lots of these jobs."

No Simple Matter

For example, in his book Gosselin interviews several Nobel Laureates in economics about how they handled their own retirement portfolios, and found they made the same mistakes as the average investor. "It turns out that [retirement investing] doesn't just paralyze ordinary mortals, but also the Nobel Prize winners who came up with the theories we're supposed to use to make these decisions," says Gosselin.

Moreover, consumers are operating in markets that are so lightly regulated, even the person who becomes a "specialist" and figures out how to invest his 401(k) plan must also be a watchdog, and determine if the plan is ripping him off with egregious hidden fees. When consumers do get hurt by a health insurer who arbitrarily rejects a claim, or a 401(k) plan administrator that fails to follow their instructions, they face a Herculean fight for justice.

Free-Market Chaos

Gosselin cites the Supreme Court decision earlier this year in LaRue v. DeWolff, Boberg & Associates. In that case, James LaRue had instructed his 401(k) plan to change the investments in his portfolio, but the administrator never carried out his request -- resulting in a $150,000 loss between 2001 and 2002. LaRue sued for a breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA), but the lower courts ruled he couldn't sue to recover his losses because they didn't affect all or a large number of plan participants. The Supreme Court later reversed those decisions.

"Here's a case of a person who judged the risk, made a decision, ordered it to be executed, and they didn't do it," says Gosselin. "And until the Supreme Court came along and said ‘maybe a company does have some obligation to respond to the direct orders of somebody,' this guy was out the money.

"Financial markets are wonderful, they innovate like crazy, but they can also cheat like crazy, and the reason you have regulation is to be sure they stay within human bounds -- and we haven't done it for a generation," says Gosselin. "We took this free-market credo and we let basically our employers, our insurers, and our real estate agents run right off the end of the pier with it -- and we're the ones stuck with the consequences."

Commerce vs. Trust

Along with broader financial issues, the Yahoo! Finance survey also found a huge number of consumers troubled by their everyday transactions. Three-quarters of those polled said they're somewhat or very worried "that most retail and service companies play games with pricing and it's hard to get a fair deal."

"Companies have abandoned the whole idea of pricing," says Bob Sullivan, author of "Gotcha Capitalism: How Hidden Fees Rip You Off Every Day -- and What You Can Do About It." "There will be one price on the store window, one that the [salesperson will quote] you, and they always tack on stuff afterward. There is an awful lot of animosity between consumers and the stores that service them. I think it's a genuine threat not just to civility, but the way the economy functions -- any kind of commerce involves trust."

Next week: Some solutions to the biggest financial anxieties uncovered by the survey.