I got stuck in a major traffic jam again last week, a trend that seems to be getting worse. However this was no traffic jam on the freeway, highway or any kind of road. It was a lunch time traffic jam to the one microwave in our office as more and more people bring lunch from home; part of their strategy to save money as the national belt tightening trend continues! Belt tightening or frugality, which was shunned during times a plenty, is now back in vogue and becoming the norm rather than exception. Water cooler talk has shifted from the latest hot stock pick to money saving ideas during one of the toughest recessions the nation has ever faced. Here are some personal finance examples I have observed that confirm America’s shift to frugality. Have you joined the frugality and thrift band wagon yet? If so, leave a comment with your story.
– Savings rates are going up after years of decline. With jobs less secure, houses worth less and stock-market portfolios back to 2001, Americans are saving more now than ever. The easy credit and free spending lifestyle of the last 10 years is definitely over and the shift in habits doesn’t look to be ending anytime soon. The WSJ published a soon to be released survey by Discover, that shows about 35% of consumers surveyed expect to reduce their debt levels over the next six months, and a third said they have already done so – even though their outlook on the economy has improved. One in three said they would put the money freed up by lower loan payments into savings. After doubling their outstanding debt over the last decade, US households last year reduced their total debt outstanding for the first time since World War II, according to the Federal Reserve.
– High interest saving accounts and Treasury inflation protected bonds (TIPS) are providing the safest and most consistent returns. Once considered the most boring of investments, high yielding interest accounts have become hugely popular as a place to park all those increased savings. Despite paying a measly 1% to 2%, these are the surest of investments in the rockiest of times. I know that my emergency funds are parked in these types of accounts and bonds.
- Target and Wal-Mart are opening stores as other retailers and up-market chains go out-of-business. One clear sign of thrift are changing shopping patterns with more and more people shopping at Target and Wal-Mart, once considered as shop’s for the poorer working class only. This is especially the case for families where every dollar has to be stretched as far as possible. I don’t know about where you live, but it seems while every other chain is closing down or announcing layoffs, Wal-Mart and Target are going strong. Personally I am not a fan of Wal-Mart and prefer Target any day. But at the end of the day, it is hard to beat the low prices offered at both these national retailers (even compared to online deals!)
Some companies are already repositioning themselves for a more frugal consumer. “The current economic conditions have created a fundamental shift in shopping behavior,” Kathryn Tesija, Target Corp.’s executive vice president of merchandising, said in a recent conference call with investors. “We are allocating more shelf space to non discretionary categories” like food, health care and baby products, she said, and drawing attention to the store’s low prices. “Guests won’t come to us for everyday necessities if those necessities aren’t priced right.”
– Netflix and streaming subscriptions are on the rise. The company just announced record profits and subscriber growth – which is not surprising in the current economy as folks look for cheaper entertainment options. After all, rather than pay $50 for a night out at the movies, it is much cheaper to watch movies at your place for less than $15 a month. Fun and frugality are not mutually exclusive after all.
The fact that all generations are learning to save, albeit the hard way, is the silver lining of the current recession and habits learned today will stand us in good stead for the years ahead. Back to my lunch time traffic jam, I may start bringing in cold sandwiches or perhaps a microwave booking sheet. Either way expensive lunches and $5 latte’s are out.