by Tricia
I guess it was bound to happen. Our area usually isn’t too affected by downturns and upturns in the economy, but we are finally starting to see the effects of the economy rippling down. The news is starting to report on more businesses closing their doors for good or shutting down for a while. Most of it sounds like a cash flow problem, since demand and consumer spending is low.
Looking in the paper, I noticed that there are less job opportunities – about a 2/3 reduction. Some of that could be due to it being winter. But it’s still lower than normal.
We probably aren’t helping things much at all – we aren’t spending that much money right now. Our favorite restaurant no longer has its flair because we figured out how to duplicate our favorite items from it at home. Even McDonalds isn’t as special since we have made our own modified Big Macs successfully (thanks to Top Secret Recipes).
Plus it’s winter! Right now it feels like 7 degrees out with the wind. BRR. I’m content with sitting on the couch snug with a blanket. There’s no desire to go to any store to go shopping LOL.
There is an article at the MSN Smart Spending blog that asked if frugal people are ruining the economy. Tough question. While I definitely don’t believe frugal people are to blame for the current economic condition, I know that our family is affecting local businesses if we no longer spend money there. It’s a small impact, but if there are more people out there like us – it turns into a big impact.
http://articles.moneycentral.msn.com/Banking/YourCreditRating/why-lenders-might-forgive-your-debt.aspx
I don’t get the frequently made argument that frugal people are somehow responsible for our country’s economic issues or that it’s dangerous to our economy to cut back on spending. Even if there is an economic ripple effect from people pulling back, doesn’t this need to happen sooner or later? Isn’t it essential that Americans adopt sustainable financial habits (saving, spending within their means, having retirement money, etc.) and that the economy adjust to reflect that? Sometimes people act like we can indefinitely sustain an economy that’s based on people perpetually going into debt, spending more than they earn, living above their means in in relative luxury, not saving for retirement or anything else, and churning through endless unneeded products (therefore hurting our environment). None of that is sustainable and should not be the basis for our economy. The last ten or more years have been a boom time, not the norm. By definition, an economy cannot always be booming and consumers can’t make stupid decisions just to sustain a boom.
What I think is interesting is that frugality is looked down upon and going into debt and living beyond one’s means is admired. Something is wrong with this mentality. In the grand scheme of things, it is NEVER right to spend what you don’t have and this applies to governments, individuals, companies and organizations. The end does not justify the means. I think this is fueled by the fact that when one goes to sign a contract for a cell phone in the US, for example, your $39.99 bill ends up being about $50.00. Greedy corporations decide how we spend a portion of our money, not us. So we have less and less discretionary spending. So we buy less, and the coporations raise their fees (banks, credit cards, utilities, etc.) (Not so) hidden fees are just one symptom of a society that is out of balance – with nature, morality, and just plain old common sense.
To me that’s kind of a odd argument. You aren’t spending at your local merchant because you don’t have cash. In the past few years the majority were using credit. It was the main econominc feeder. Now everyone is so tapped out, that even credit isnt’t there. Once the mortgatge mess is done, they need to work to help folks through the revolving credit mess. Take away the crippling debt, and folks will spend again, though cash, not credit. It’s a fundemental shift in mindset. Very similar to the depression era. Years of misleading in lending is what has crippled mainstreet. Not frugality!
I don’t think any single group of persons are responsible for the economy’s downturn. If anything, our economy has been as well as it has been for the past ten years simply because consumers were living way beyond thier means, just look at consumer credit trends! Now, if everyone were to scale back to live within thier means on cash and not credit, does it make them ‘unpatrotic’ if it hurts the economy?
I don’t think so. I think businesses need to adapt. Innovate or die is what I always say.
– Neko
We are seeing the same thing here in Canton and surrounding areas. Almost all new construction has come to a complete halt and for the first time since we moved here we have neighbors that have lost their homes. My major concern now is what will happen if the “Big Three” don’t get an assistance from Congress.
I understand the catch22 that the article is trying to present about being frugal and how it affects the economy. But to be honest that is BS and such a lame excuse. How could they write an article about that? Who’s business is it to what someone does with their money, and then blame them for hurting the economy? That’s just wrong.
Craig
www.budgetpulse.com
It’s cold here in Colorado too and I have no desire to go anywhere, but home!
Amen Karen!!
I agree with a lot of the comments made by other people. Bottom line: people need to financially do what is best for their families, not what is best for their local businesses.
Frugal people have probably been frugal for a long time. If anything, they are sustaining the ecomony because they were living beneath their means before, and are therefore able to ride out the economic downturn without affecting their lifestyle significantly.
The spenders, on the other hand, were spending their credit, and now have to stop. That is the spending that is going down for retailers.
LOL, the topic that popped out to me in this post was the homemade Big Macs! We do this too, and they are delicious! We use real cheese if we put it on at all. We just had them about a week ago.
You say: There is an article at the MSN Smart Spending blog that asked if frugal people are ruining the economy. Tough question.
This is not a tough question at all. What are some of the reasons people are being frugal? How about a static or decreasing average wage and standard of living, continuing escalating costs in energy, food and health care (my company withdraws $900 per month from my paycheck for my and my spouse’s health insurance – what a “bargain”!).
Meanwhile, companies outsource jobs to China and the developing country du jour while the backbone community jobs here disappear. And we are supposed to be loyal to these companies by buying products (most of them unneeded)? We’re supposed to help out American carmakers when most of their cars are terribly designed, inefficient and expensive to run?
Frugal people are not the problem — they often work the hardest and spend enormous energy to make ends meet. They also populate professions (e.g., artists, teachers) that are notoriously low-paying.
In my profession, I have read too many articles over the past year about people making $50,000 and trying to pay a $500,000 mortgage or with 6 figure credit car debt to buy things that will be gone long before the debt is — that’s not being frugal or smart.
Well local merchants should carry something that you need or makes you spend the extra money. Supply and demand.
Also if there were no credit card debt in this Country things would be tremendously different – for the better. It’s a lie that the world runs off debt better than if there were none. But I’m sure we’ll never see that because too many people love their debt!
There is no doubt that credit, when used correctly and responsibly enhances a person’s quality of life. Businesses are started with loans, home ownership would not be possible without a mortgage, gifted children can attend higher education thanks to student loans. So, credit has it’s place. People should borrow within their means-that’s the key.
Somewhere along the way, people lost their way. They felt debt was a right! When folks started using credit cards to buy a Starbucks coffee, they should have realized they were in trouble.
People need to buy one home in their lifetime and live in it till they retire. Just as they did in the 1950’s. In Europe, homes are passed down from generation to generation. Wouldn’t it be wonderful if most people who are in their mid 60’s live in a home with a paid-off mortgage? Wouldn’t it be fantastic if a college student chose a career that would easily pay enough in salary to easily pay back a student loan upon graduation? How many students are there who graduated from a culinary school, with $100,000 in debt only to take a $10 an hour restaurant job? Not everyone can be Wolfgang Puck.
Not everyone can drive a BMW, have granite countertops, stainless steel appliances, front loading washing machines and enough bling to choke a horse. Not everyone can wear $600 designer shoes, $3400 handbags or dine on $200 urns of Russian caviar. This is where we all lost our way. We mistakenly borrowed and sucked out our precious home equity and maxxed out every single credit card those unscrupulous banks shoved down our throats and mailboxes.
It is going to take 3 years for the purchasing power of consumers to restructure. We still need a car (but will use them for 7 years vs 2), we still will want to buy a home, we still need to get educated (but may learn valuable trades instead), we still need clothes (but will buy 2 prs jeans vs 75) we still need food, furniture and will eventually return to taking our annual vacation. But most of it will be done with money that we are starting to save. So, we will need at least 3 years of savings (while we pay down our existing debt) to get back our purchasing power.
America is going through a valuable restructuring right now. Layaway is making a valuable comeback. Purchases are being re-evaluated, we are all looking at home ownership, car purchases and our standard of living differently. All for the better, I might ask.
It is going to take some time but I am confident that America will be more the better for it. It’s going to be painful but we all will emerge a much stronger nation.
Good luck to all of us.
Nevermind that salaries for middle to low income people have been stagnant and not keeping up with inflation for the past DECADE. No, that can’t be it, it must be that people aren’t spending enough money that they don’t have.
:::eyeroll:::
Frugal people aren’t the problem. People trying to live a lifestyle beyond their means is the problem. I think the financial crisis will be a wake up call for a lot of people, spending patterns will change and frugality will be the new trend going forward – rather than over-consumption.
It’s just starting to get warm in Australia. I still like my couch…with or without blanket.