Americans have a renewed interest in all things frugal during this recession. They’re spending less money, using credit cards less, and the terms “frugalista” and “bargainista” have entered the daily lexicon.
Keeping up with the Joneses now means one-upping a neighbor with bargains you got at the consignment shop.
But will it stick?
Recent reports suggest we have good intentions to maintain our fiscally responsible ways.
About half of Americans report they either avoid shopping altogether or shop only for those things that are absolutely needed, according to a survey sponsored by Citi. And 72 percent of Americans say they have cut back on everyday expenses.
“Only time will tell, but my hunch is we’re entering a new era of frugality,” said Jonathan Clements, director of financial education with Citi Personal Wealth Management. “We are 15 months into the economic recovery … and yet consumers are telling us that they are continuing to cut back on their spending.”
In addition, 80 percent of people claim to have at least a general plan for income and expenses, up from 47 percent in 2006, according to a survey by Synovate commissioned by personal finance author Matt Bell.
“Budgets have always been the Rodney Dangerfield of personal finance tools,” said Bell, who writes the MattAboutMoney.com blog. “But just as we’ve seen the recession bring about other changes in people’s financial behavior, such as more frugality, the lowly budget finally seems to be getting some respect.”
But Bell said he knows from working with financially distressed people that a general budget plan can mean simply balancing a checkbook or having a rough notion of what a consumer is spending on things. “My fear is that if and when the economy improves, those general plans will become even more general,” he said.
Since consumer debt peaked in 2008, Americans have chopped $922 million from their debt, or 7.4 percent, according to the Federal Reserve. Americans are reducing debt at a pace unseen in at least a decade, according to a recent Fed report, “Have Consumers Become More Frugal?” Unclear, say researchers, is whether that new frugality stems from borrowers being forced to pay down debt as credit standards tighten, or whether it’s a voluntary — and permanent — shift in behavior.
Farnoosh Torabi, author of the new book “Psych Yourself Rich,” said she thinks the most recent recession, though technically over, affected people more than the tech bubble of 2001 and other minor economic recessions because its effects have persisted for so long. Young people, especially, are likely to benefit.
“They got to see early on in their lives how overspending can derail you and divert you from your goals,” she said. And they saw it from a variety of directions, whether parents getting laid off or graduating school to enter a lousy job market, she said. “They had a 360-degree wake-up call about how money is the foundation of your livelihood. That’s a valuable lesson for this stage of life.”
The trick is moving from the descriptive to the prescriptive: “How do we make these frugal behaviors last?”
Change your attitude.Instead of viewing your newfound financial responsibility as a temporary exercise in deprivation, view it as a lifestyle and make peace with it. Author Jeff Yeager, dubbed the Ultimate Cheapskate, calls it slaying your Enoughasaurus, knowing when you have enough and being content with it.
Have goals. The easiest way to say no to the tempting purchase in front of you is to have a specific reason to reject it.
“You need a reason for doing whatever it takes to spend smart, a goal that motivates you,” Bell said.
Track progress. “Monitor your decreasing debt or your increasing vacation fund,” Bell said. “When you see that spending smart is getting you closer to the accomplishment of your goal, that’ll motivate you to keep going.”
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