Baby boomers had parents or grandparents that lived through the great depression which for many, if not most, had a lifelong effect on their behavior. In general we scoffed at their frugality and made fun of penny-pinching. Why save the little amount of leftovers after meals? There’s plenty of food to have a new meal tomorrow. Why wash out plastic bags and reuse them? A box of new sandwich bags is in the pantry or at the store.
This recession may have some of the effect that the depression had on our parents and grandparents. Research by AlixPartners indicates there will be a more frugal normal after this recession ends. The main reason is that my generation (love that Who song, but I digress) drove the spending boom of the last two decades and we’re in or heading to retirement. We need to SAVE, SAVE, SAVE.
We’re busy paying off debt, dealing with loss of income and if we’re lucky and not dealing with the that, then beefing up our retirement accounts. In fact, consumers cut debt a record $21.6 billion in July according to the Federal Reserve. We only have about $2 1/2 trillion to go!
Between the severe cutback in credit availability, cutbacks in personal spending and a general unwillingness to take on the risk of new debt Americans are paying off debt and saving more and we might not return to our old ways. Post-recession spending is projected to return to about 86% of the pre-recession level.
Personally, I feel fortunate to have a job that provides technological solutions to the health care industry. Health care is a segment of our economy that hasn’t had severe cutbacks. However, I’ve had friends and family lose their jobs or have reduced hours. In the back of my mind, I fear that it could be me. Just like others, we’ve tightened our belts as the importance of being debt-free is apparent.
So like others I count my blessings, spend less, save more and pray for those less fortunate. What changes have you made as a result of this recession? Will you return to your previous ways or are some changes long-lasting?
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