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Have You Changed Your Spending Habits in Light of the Current Economy?

The May issue of Money Magazine contains an interesting article titled How the Crisis is Changing You. According to the author “a new set of American values is emerging from the ashes of 600,000 layoffs a month, a lost decade in stocks, and the worst housing crash ever. For most of us it amounts to a large-scale makeover of the way we think about money and life. We’re not just cutting our bills, we’re rejecting materialism We’re placing safety and intrinsic rewards like relationships and personal growth ahead of profit.”

Survey results conducted for the magazine showed that “nine out of ten respondents have changed the way they manage money as a result of the crisis; seven of ten said their priorities are shifting; and a whopping 94% said the recession will have a lasting impact on the way they handle their finances. Seven in ten said they consider spending time with family more important than ever and more than half said they now feel plain guilty buying things they don’t need.”

The author sites a number of reasons for the change in perspective including the goal to stop buying things we don’t need and can’t afford as well as the goal to dig ourselves out of debt. According to the article the national savings rate jumped to a 14-year high of 5% in January. About three-quarters of survey respondents said increasing the amount they save is more important now and nearly 70% reported that they won’t purchase an item if they can’t pay for it with cash or a debit card.

The second major reason for change, “even if you can afford nice things, it’s no longer cool to flaunt them.” These days people are more mpressed by friends who own their cars, rather than friends with tricked out new ones bought on credit. In the past many of us believed our neighbors could afford those expensive cars and designer labels, now we realize many of those neighbors had gone deep into debt to acquire those status symbols.

With traditional pensions a way of the past, many people are beginning to realize that the responsibility for retirement planning lies in their own hands. It seems crazy to leverage the house to pay for new shoes and grand vacation when the stock market is declining and retirement is getting pushed further and further into the future. Many Americans have also grown distrustful of banks and corporations. This distrust will lead many to save more and stash cash to make certain their best interests are protected. After all, the only one looking out for you is yourself.

According to the article many Americans now view security as one of the most important job factors over big salary, flexible hours, advancement and paid time off. The fear of unemployment will also push Americans to spend less and save more.

Lastly, when times are tough many Americans begin to reflect on the things that really matter. More Americans are volunteering in their communities, making families a priority and spending more quality time with their spouses. All of these things add up to a focus on people over things.

My husband and I have been frugal for quite awhile now, so we haven’t drastically shifted our spending or savings habits, but our safety net, (money in the bank), and lack of debt has certainly made us thankful for our thrifty ways during these tough times.

How about you? Have you changed your spending or saving habits in light of the current economic downturn? Have you started spending more time with your family or started volunteering?

Get out of Debt

Monday 27th of April 2009

Hmm... I'm old enough to remember the 1990's recession. At the time there was a lot of "down-shifting", thrift magazines, people growing their own food and so on.

You know what? About three years later circa 1995 when the dot.com boom started, they forgot all about the thrift and went back to consumption!

I think these things go in cycles. The only people who change their habits permanently are those who've actually been burned by the recession (about 10% of the population). They vow "never again". Everyone else who was practicising thrift only from fear of what might happen, forgets the fear as soon as the boom resumes. And a new generation also enters the adult world during the boom who assumes that the boom was permanent...

Elizabeth

Friday 24th of April 2009

interestingly, I am spending much more this year than I usually do. however, it is on things like my health and learning new things and lots of fresh/local flowers .. so I consider the money well-spent. I am also giving much more since I figure the charities need the money more than I do. :)

Matthew credits

Saturday 18th of April 2009

Great article. Somehow I think that this economic recession is a blessing in disguise. It helps people changed spending habits,learn to set priorities and the value of saving.

Steven@hundredgoals.com

Saturday 18th of April 2009

I was told yesterday that I will be getting laid off and that next Friday is my last day of work. Fortunately, like you, I don't have much debt and will be able to survive on unemployment benefits until I am able to find a new job. My thinking has also shifted from collecting money to focusing on education, experiences and other hobbies. I'm glad that this economy is changing our perceptions about what is important and realigning our priorities.