Many people have adopted a cash-only lifestyle in response to one financial catastrophe or another. It could be tied to a job loss that shuts off the cash flow, forcing people to take a hard look at their outstanding debts. But even though they may have put their money hardships behind them, they haven’t fallen back into their old bad habits. MarketWatch explores this phenomenon in this article.
The extended shopping spree that Americans enjoyed for the better part of two decades has come to a screeching halt, thanks to the recession, high energy prices and a seemingly unending stream of layoffs.
Frugality — and it’s defined in different ways across the socio-economic strata — is not only chic, it’s downright sensible and that makes people feel smarter, experts insist.
It appears that for some of the financially educated, conspicuous consumption has bitten the dust. They’ve adopted frugal habits such as:
- Shopping at garage sales;
- Giving up their cellphones;
- Growing their own vegetables;
- Clipping coupons;
- Carpooling to work;
- Not using credit cards;
- Shopping in second-hand stores;
- Buying store brands.
Also, people are getting rid of the junk they’ve accumulated, as evidenced by the 60% increase in garage sale listings on Craigslist. People are discovering that less is more. The trend isn’t limited to people in financial hardship, either. Many people who earn over $100 thousand have drastically cut their spending, according to Pam Danziger of Unity Marketing.
She studies the habits of people with incomes of $100,000 or more, which represent the top 20% of U.S. households. She calls those consumers “the economy’s heavy lifters” because they account for some 40% of consumer spending.
“These consumers are very drastically pulling back spending,” Danziger said. “They really are defining more precisely what they need versus what they want and the wants are coming up short.” In a recent Unity Marketing study, she said 80% of respondents agreed with this statement: “I am thoughtful when I shop: I am thinking more about whether I really need an item or just want to buy it on impulse.”
When the stock market was rising fast and the values of their homes were hitting unprecedented levels, those households felt free to spend, spend, spend because, well, they could. “Now that all that perceived wealth is gone, they’re back to having to spend their earned income,” Danziger said.
Another contributing factor to a cash-only lifestyle is the fact that credit is harder to get than it used to be. Credit card debt is falling slowly, replaced by debit and pre-paid credit cards. But is this new frugality just a passing fad?
A recent Harris survey for the NFCC, the national credit counseling group, found that of the 57% of adults polled who said they were spending less, 45% said they would jump back into the stores if their financial situation improved.
“Those people are wired like that,” said NFCC’s Cunningham. “They’re grieving over having to give up their lifestyles that they created.”
I know that we’ve cut back on several luxuries, like dining out and buying clothing. I don’t have a lot of junk lying around, as I’m the crap-thrower-outer of the family, so no Craigslist for us. This recession has reinforced some of my good habits, and discouraged me from picking up any new bad ones. I can’t ever see myself dropping lots of cash on the newest gadget, or expensive toys that we can’t afford.
How about you? Has this recession changed your buying habits?
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