Thursday, May 6, 2010

Frugality among consumers is outliving recession

According to a recent Washington Post article:

Even as the economic recovery plods ahead, many American consumers are
refusing to come along.

They're not spending freely - and they have no plans to. Many of them have steady income. They aren't saddled by high debts.
They don't fear losing their jobs. Yet despite recent gains, they've lost so much household wealth that they're far more cautious about spending than before the recession.

Their behavior suggests that the Great Recession may have bred a new
frugality that will endure well into the recovery. And because consumers fuel
about 70 percent of the economy, their tightfisted habits means the rebound
could stay unusually sluggish.

That's the picture that emerges from an Associated Press survey of leading economists and interviews with more than two dozen ordinary Americans. The new AP Economy Survey asked 44 leading economists whether the recession created a "new frugality" among consumers that will outlive the recession. Two-thirds said yes.

I don't really consider myself to be a frugal person. I'm willing to spend money on things others may consider 'splurges' if they fit in my budget. I am making a concerted effort to cut out mindless spending, but I do like to travel (after saving for it) and plan to make travel a life-long hobby.

There are things I have no problem living without like a car, fancy kitchen appliances, air conditioning (except in very high temperatures). But because I don't really miss those things, they don't really count as sacrifices in favor of frugality. For me, balancing spending and saving is more realistic than trying to be frugal. But I so admire frugal-minded people like personal finance personality Michelle Singletary and some of the more frugal-minded personal finance bloggers out there. Whether people choose to be frugal or not, I hope being more fiscally conscious in general is a habit that is here to stay.

Do you consider yourself to be frugal and if so, is your frugality permanent or temporary based on the economy?


FB @ said...

Permanent frugality, borne out of the desire to be a minimalist.

It's not that I WON'T spend money on things I really want or love.. it's that I really assess whether I want or love it first, before deciding to spend the space on it, and then deciding to spend my money on it.

Small Budget, Big Style Chick said...

@FB Though I couldn't describe myself as being mimimalist any more than I could describe myself as being frugal, but I do feel that accumulating 'things' rarely does more than just take up space.

I personally prefer to spend my money on experiences (travel, arts&culture) rather than things and would cut my expenses in all other categories, to offset those costs if necessary.

Keith Morris said...

I'm becoming more frugal since I started reading all these finance blogs. I'm especially frugal when it comes to buying the things my wife wants. ;-)

Anonymous said...

I'm like you: balancing spending and saving is more realistic than trying to be frugal.

I will save and sacrifice to travel (international and visiting my parents) and for art (paintings, museums, musicals). Or for stuff that I want, I'm saving for a cute travel tote right now. We went to Rome a few weeks ago, best trip...worth not going to the movies or eating out (except for special occasions) for the entire first quarter of 2010 so that we could eat out there, shop, tour, whatever like we wanted to.