Many people pledged to make a change when the U.S. economy took a turn for the worse in 2008. People saw the issues that unchecked spending caused in their lives and decided to live more frugal lifestyles.
However, it turns out that the American addiction to consuming has been harder to kick than we imagined. We’ve tried to go back to basics, but the lure of easily spending money we don’t have has been too much to resist.
You may have heard the news media report that Americans are reducing their debt in record numbers.But that’s not the whole truth. While there was a decrease in how often credit cards were used in the last several years, it has been slight.
The Federal Reserve’s 2010 non-cash payment study indicates there was a 0.2% decline in credit card usage between 2006 and 2009. But not everyone is stashing money in savings and writing large personal checks to pay off credit card debt. What’s actually happening is many Americans are defaulting on their credit cards and mortgages.
In 2009, outstanding credit card debt fell by more than $93 billion compared to 2008. But according to the credit card comparison site CardHub.com, $81.6 billion of that came from people who defaulted on their debt.
As the United States begins to recover from the so-called Great Recession, we are already returning to our old habits.
In November of 2010, statistics showed consumer spending rose for the fifth month in a row. Retailers are saying the 2010 holiday shopping season turned out higher than expected sales numbers. The National Retail Federation raised its holiday forecast in mid December, and expects growth of 3.3% compared to the 2009 holiday shopping season.
“People are going through frugality fatigue,” said NDP Group chief analyst Marshal Cohen in an interview with Newsweek magazine. Many economic experts agree that consumers are finding it hard to resist the urge to get the latest gadget, update their wardrobe or buy a new car – even if it’s not in their budget.
The reality is that it has become difficult for the average person to change their ways. It seems we are quickly forgetting our plan to simplify our lives and cut back on spending. Too many of us are talking the talk, but we are not walking the walk.
According to a recent Gallup poll, nearly nine in 10 consumers say they are still keeping a close eye on their spending. Yet the average American household plans to spend $714 on Christmas gifts this year. That’s up quite a bit from last year’s holiday budget of $638.
It’s true that consumer confidence and spending is important to boosting the U.S. economy. But spending money you don’t have will only cause financial hardships.
The national unemployment rate remains just under 10% and a report from the Labor Department released in mid-December indicated payrolls decreased actually decreased in 28 states. Information like this should not accompany an increase in spending.
There’s no easy solution to living a more frugal lifestyle. It takes plenty of self control and commitment.
There are constant temptations to buy everywhere you turn. Whether it’s a credit card that rewards you for spending or a furniture store that offers no interest and no payments for two years – you have to learn to say no. If you can’t afford monthly payments today, how can you be sure you’ll be able to afford them in two years?
The first thing you need to do for you family is put together a budget that you can follow. That will be the groundwork for what you can and cannot spend, and what you can put away in savings. After that, look for areas where it is possible to cut back. Could you choose a less expensive cell phone plan? Could you get rid of cable television? Could you pack a lunch more often and eat at restaurants less frequently?
Now is an important time to learn to tighten your purse strings because the cost of living is on the rise. Rising commodity prices on basic items like corn, coffee and crude oil make trips to the grocery store and gas station more expensive than ever. Consumer spending on health care and education represent some of the biggest increases in 2010. It’s not always possible to reduce spending in these areas. That’s why we must control our spending in other areas.
Learning to live below your means is crucial, especially if you want to get through yet another downturn in the economy.
About the Author:
Kasey Steinbrinck spent six years working as a journalist in the television news and newspaper industries. He now writes about personal finances and living free of debt on the Check Advantage Blog.
