The cultural shift toward financial security

In the past few months, I’ve had a noteworthy number of conversations about the trend toward frugality. More of my friends seem interested in finding ways to save, I can’t throw a rock at the Internet without hitting a money-saving “hack,” and, during a job interview, I had a lengthy discussion about how “personal finance is now trendy.”

Get Rich Slowly reader and money blogger Mrs. PoP noticed it too, and wrote about it on her blog:

“Recently I’ve begun to notice something a bit unusual. An interest in personal finance seems to be becoming more common, and dare I say, trendy… Maybe I’m just drawn to [friends’] comments because of our own interest in personal finance. But maybe, there’s also a chance that personal finance — in a non-gimmicky way — is actually starting to be ‘cool’.”

I don’t think it’s just our imaginations. There’s proof.

Americans prefer saving to spending

Gallup poll from December 2013 found that Americans are more interested in saving money than they used to be. The results were enough for Gallup to declare that spending less is likely to be the “new normal.” They even went so far as to say the “new American pastime” might be saving money.

Forty percent of those polled say they’re spending less in recent months, and 28 percent said they were spending more. There are a couple of points worth noting about this statistic, however.

  • Respondents may not have gauged their spending accurately, especially considering the poll was taken around the holidays. “Although self-reported spending is up overall this year, with additional gains through Thanksgiving week, Americans don’t necessarily perceive themselves as spending more.”
  • In 2010, even more people reported spending less — 57 percent. “This suggests many Americans no longer feel much of the pressure to save that they felt during the recession.”

But despite feeling less pressure, there’s still evidence that more Americans are interested in good money habits.

In a press release, Gallup wrote:

“Americans themselves say they prefer saving money over spending it, by 62% to 33%. However, this has not always been the case. Prior to the 2008 financial crisis, Americans were more evenly divided.”

Post financial crisis, Americans are indeed more interested in saving. And even better news, household debt (presented as a percentage of GDP) has also fallen to 81 percent from 98 percent in 2009.

Gallup’s findings mirror another study, which found that a large percent of Americans live below their means. According to the FINRA Investor Education Foundation survey, 41 percent of Americans “report spending less than their income.”

“36% spend about equal to their income, and 19% spend more than their income,” the survey reads.

Of course, there’s the flip side to the coin. FINRA’s survey found that over half of Americans (56 percent) don’t have an adequate emergency fund. Americans are still struggling, and perhaps they don’t have much choice but to change their ways.

As a whole, it’s an indication that Americans aren’t financially secure just yet. There’s a lot of work to be done, and the shift toward wanting to save more and spend less is at least a step in the right direction.

Art imitating life?

Remember the ’90s? Remember Monica and Rachel’s sweet New York apartment? They even had a coffee shop downstairs, where they spent a lot of time and, presumably, a lot of money.

Remember Fight Club and American Beauty? Those pre-recession movies taught us lessons about materialism, over-consumption and the superficiality of living the American Dream.

Fast forward to 2014, and we’ve got Girls, a show about broke twentysomethings who move back in with their parents, borrow money from their parents, and struggle to find jobs. And, maybe it’s a coincidence, but two of 2013’s most critically acclaimed movies, Nebraska and Inside Llewyn Davis, carry themes of hardship and futility. If art imitates life, I think we’re witnessing it.

There’s also Extreme CouponingExtreme Cheapskates and the Thrift Shop song. Pop culture even reflects our cynicism toward the one percent — Wolf of Wall StreetAmerican Greed and, of course, every reality show that features rich people with unsavory personalities.

In 2001, we discussed the issue of over-consumption in a college class. We talked about the drawbacks of it, and most of us agreed it was superficial and dehumanizing. Someone argued — WhyWhat’s so bad about wanting to spend money? Why does it mean you’re superficial? It’s a good point because, as college kids with no personal finance experience, we were all missing the mark.

Eventually, the drawback of over-consumption is a loss of control. For most people, the desire to consume — to keep up with the Joneses — becomes overwhelming, and they lose control of their finances.

And while money is just money, we need money to live, and not having it can really mess up your psyche. You end up buying more stuff to make up for it, trying to maintain some semblance of control. Then, before you know it, you’re in debt and, as Tyler said, “the things you own end up owning you.”

We all know this happens — and over the past several years, we’ve seen it happen.

Shift vs. trend

As Sam, the Financial Samurai, pointed out, sometimes it takes having our backs against the wall to change our financial habits. Of course, that’s not the case for everyone; but as a country, I think that is what’s happening.

I don’t think it’s a trend toward frugality as much as it is a cultural shift. Sure, the percentage of Americans interested in spending less was higher immediately following the crisis. But, overall, the desire to save more and spend less has stuck. It seems most Americans want to develop good financial habits not as a crash diet but as a lifestyle change.

“In a follow-up question, Gallup finds that the 40% ‘spending less’ crowd is more likely to see their sudden thriftiness as a new, normal pattern (28%), rather than temporary (12%).”

Americans taking control

For years, we over-consumed. We were encouraged to over-consume, and it put us in a bad place. We lost control.

But life, and the economy, has its ebbs and flows. We shift our views and behaviors in line with our environment. And the change in economic climate has stayed pretty gloomy over the past six years.

Sometimes it takes a while for a silver lining to emerge. But the good news is, this lingering gloom has finally inspired people to regain control. Backs against the wall or not, there’s a shift toward saving and financial education, and that’s good news.

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There are 27 comments to "The cultural shift toward financial security".

  1. Beth says 02 April 2014 at 04:59

    Interesting argument, but alas it will take more than a few self-reported polls and some pop culture references to convince me. The academic in me wants to see more research — if people’s savings rates have gone up, by how much? What is people’s debt-to-income ratio compared with 2007? Are people spending less on luxuries like travel, electronics and new cars? How does the average American spend their money? Is there a trend towards buying smaller homes?

    And what is the source of all this information? Are you relying on people to honestly answer surveys, does the data come from a biased source (like financial companies), is it government statistics, or…?

    I live a frugal lifestyle, and it would be very easy for me (for all of us, really) to find examples that confirm what we do. (It’s called confirmation bias.) Despite what my friends and family are doing and the growing number of personal finance books and blogs out there, the average Canadian’s debt-to-income ratio went up over the past few years. (I think in the U.S. that number went down?)

    I’m just wondering what the big picture looks like. Thoughts, anyone?

    • Money Saving says 02 April 2014 at 05:33

      Savings rates have gone up since the crash, but they are on the way back down. It was just reported the other day that the savings rate fell again…

      • Budget Girl says 02 April 2014 at 08:51

        Right, BEA data show the savings rate is slowly declining and personal consumption slowly rising again.

        However, I do agree with the point in this article about needing to express control. I think for some, that is done via greater financial literacy and spending less. But for others, the trend seems to be toward being able to do more things on your own.

        Anecdotally, you see more people trying their hands at canning, gardening, or even making their own makeup. Home schooling also seems more widespread now. Blogs like Pioneer Woman have gained tremendous popularity. There is renewed pride in household self sufficiency, whether it is through educating your children, or creating your own door wreath. Pinterest boards with the greatest popularity have to do with making your own soap or fashioning trendy toddler outfits.

        I think all of these things speak to folks wanting greater control over their lives, but in a frugal vein. With recent experiences fresh, I also believe it says: “When a recession hits again, we’ll be ready.”

    • HKR says 02 April 2014 at 08:22

      I agree, self reporting can definately be misleading. It seems to me that maybe the trend isn’t towards frugality, but rather getting more bang for your buck. People clip coupons and shop for deals so that they can save money on item A, but rather than putting the savings into savings, they do some more deal hunting and buy item B. That’s definately more financially conscientious than the former trend of “buy item A, charge item B,” but since the current trend isn’t improving the savings rate, I don’t know if it can really be considered a trend towards frugality.

      • Kristin Wong says 02 April 2014 at 08:50

        Good point! Maybe it’s that people are more interested in money itself than the principles behind earning that money. You’re right–frugality is about much more than saving a few bucks just to buy other Stuff; it’s about getting the most out of something. Avoiding waste. Although, I’ve noticed more of that lately, too. But overall, I think seeing the big picture will just take time.

  2. getagrip says 02 April 2014 at 05:20

    Aside from the media and opinon shows masquarading as news constantly screaming at us about catastrophic issues, or this or that politian, political party, group, etc. threating us and the economy, I think there is a bigger reason frugality is becoming more popular.

    We have a large chunk of the population highly concerned about their immediate future in the baby boomers, and many of them are looking with near desparation for suggestions and solutions. Pandering to a large chunk of the population (because there is still a lot of wealth there to be tapped by businesses) worried about retirement and their long term future leads to a whole lot of articles, stories, advertisements, and discussions on stretching dollars, cheap places to live, etc. and how they can provide services to help with money problems versus just trying to get you to spend your money on their product. It’s been a significant marketing shift that is finding its way into commercials and ads.

    All of this flows out to the general population and creates a subtle feeling of concern.

    The other thing I see is that we are getting to a point where you can’t escape it. Coffee shops with wifi, flatscreens hung up around lunch joints, people constantly on their smart phones and tablets, etc.. Everywhere you turn people are hooked in and that means they are being tagged by banners and ads many of which promote “deals”, “savings”, etc. like they always have, but now it’s always in your face.

    So combining this with a very real recession still burning in everyones memories, I’m surprised people are spending as much as they are.

  3. Soursurfer says 02 April 2014 at 05:49

    This does smack a bit of confirmation bias. Self-reported polls and personal anecdotes are the only evidence used. Is it possible the people close to you are not just getting older and more mature, and therefore more responsible? Plenty of articles come out all the time that state the exact opposite and none are presented here for balance. While I hope the thesis is true, I too feel no less dubious after reading this article.

    • Kristin Wong says 02 April 2014 at 15:44

      Welp, I did mention my personal experience in the beginning, but then said “I don’t think it’s just my imagination,” implying that anecdotes are just anecdotes. But yeah, I guess I see the point about self-reporting. Like I said, though, those respondents were still self-reporting in 2009. So whether they’re lying or not, something has changed. There’s been a shift, even if it’s just the insecurity of “Eep! I should be saving. Let me lie on this survey.” If they were lying, they weren’t doing it as much in 2009.

      Also, there seems to be a push to require financial literacy courses in high schools lately. Admittedly, I haven’t been keeping up with this very well, but this article talks about the “renewed focus on financial literacy education” since the recession: http://www.usatoday.com/story/money/personalfinance/2013/11/13/financial-literacy-education-requirements/2953667/

      I dunno. I know people are dumb, but I find it hard to believe that after a big ol’ Great Recession people wouldn’t have a newfound appreciation for financial security.

  4. John C @ Action Economics says 02 April 2014 at 07:01

    I’ve noticed too in conversations with my peers that personal finance is a larger concern. I really hope that you are correct and that overall our country is making a cultural shift towards fiscal responsibility.

    As getagrip mentioned, many baby boomers are realizing they didn’t plan well for retirement, and the younger people around them are realizing “Hey, in 20 years, I don’t want to be in his shoes!”

  5. Ramblin' Ma'am says 02 April 2014 at 07:07

    I am skeptical about self-reporting. People tend to underestimate what they spend. It’s the same with weight loss–people eat way more calories than they think. Plus, when taking a survey they may feel pressured to give the “correct,” responsible answer.

    • Kristin Wong says 02 April 2014 at 08:41

      Good point! But they self-reported when the rates were low, too. So even if they did just feel pressured to give a “correct” answer today, they didn’t seem to feel that pressure back then, when rates were low, so I think that reflects some kind of change.

      • Ramblin' Ma'am says 02 April 2014 at 08:54

        Yeah, it could mean that after the crash, people are more aware that they *should* be saving, even if they are not.

  6. Sir. Pog says 02 April 2014 at 07:15

    I don’t know about cultural trends overall, nor how long it will last. If these numbers and polls reflect what’s really happening, will it stick, or is it just a correction rooted in fear and bad experience during the recession.

    Speaking for myself, I became interested in my finances a couple of years ago while talking to a friend about how her debt keeps her bound to a job she doesn’t like because she has to pay those bills.

    I’ve never been one for keeping up with the Joneses. I’m content to live a simple life – as long as I can afford a little ice cream and some sports equipment. I want to be wealthy, but not for the sake of overconsumption.

    To me, good money habits, and the building of sustainable wealth is a matter of pragmatics. I want to make sure that my family has enough to live well if something should happen to me. I don’t want to have to work forever. and I don’t want to have to rely on the government or some either entity for meeting basic needs.

  7. Jim M says 02 April 2014 at 07:22

    Here’s some actual data:

    http://research.stlouisfed.org/fred2/series/PSAVERT/
    http://research.stlouisfed.org/publications/review/07/11/Guidolin.pdf

    TL;DR, the Personal Savings Rate for US citizens is still pretty low these days.

  8. lmoot says 02 April 2014 at 07:28

    I think it’s definitely trending, particularly with young people who were disillusioned from the American dream of materialism, by the financial crisis. Hipsters and the like have become this generation’s les bohemes and many people I know who are in their late 20’s and 30’s are making smart financial moves, and being very conservative. I know folks who make good incomes (one is an engineer) who have bought a house and yet choose to have roommates (who often also earn a decent living). At least two responded, when I asked if they like having roommates, that they prefer it. Usually the roommates are friends, or like-minded individuals, and they feel weird about having so much space all to themselves but still want the investment they felt owning a house would be.

    I know one couple (I think they’ve since split though), who shared a house with another couple. Not out of economic necessity, but they wanted to conserve money. The thing these people had in common is that they still drove older cars they’ve had for years, were cost conscious about everything, and just generally looked down on rampant, indiscriminate materialism.

    These days, at least among younger people, expensive cars, Macmansions, expensive name-brand fashion, are seen as “uncool”. I get more compliments on my dingy converse boots that I’ve had since 2003 than any other item of clothing or shoes I own. The phrase “Living the life” is not as attached to the same things that were important to their parents. Also DIY is cool now. Before, wearing or using homemade things was a negative, however now things like Pinterest, Etsy, life-hack, wiki-how, YouTube How-to’s, etc, people are using these as first resources before throwing things out, or outsourcing services, or buying new things.

    Also the smart ones learn from others’ mistakes and the economic crisis brought many folks’ secrets to light. That they were not as well off as people thought and the lifestyle they chased turned out to be their downfall. Shows like Hoarders, with people surrounded by their things (sometimes nice brand new things… sometimes liquefied cat — true story, look it up) Everyone (young people included) knew someone who’s car was repo’d, or home was foreclosed. A big one is environmental awareness. Being aware of ones environment has a way of affecting consumption and since that is an ongoing hot-topic, people are focusing more on how things (such as the previously popular SUVs and hummers, and gargantuan homes with nothing but headspace) are negatively impacting the environment and adjusting their actions accordingly.

    Anyway, I can go on but won’t so I’m just gonna trail off…..

    • Kristin Wong says 02 April 2014 at 09:01

      Haha–you should always go on! I love reading your comments. Yeah, I was at a friend’s show the other night. Young hipster crowd, and one of them brought up the 52-week money challenge. It was kind of jarring, but also awesome.

    • Carla says 02 April 2014 at 10:50

      lmoot, I think you’re absolutely right. Then again, I’ve always lived on the west cost – first the SF Bay Area and now Portland where McMansions are so uncool and single people in the 40s, 50s and 60s have roommates. People have wanted to have that conversation with my DH and I but I think, for me, married people need their own space.

      I get complemented on my appearance often (I “dress up” according to Portland standards) but I get praised when people realized how little I actually spend on my appearance. I suddenly went from being borderline snooty/NW/Pear Dist to cool. There’s even a bit of class-ism when you don’t appear as down-to-earth as they do with their single speed bikes and unshaven faces. Many are trust fund babies so don’t let the faded jeans fool you.

      The economy here, in Portland isn’t great overall. There are far too many part-time service jobs and not enough professional jobs.

  9. Kelly says 02 April 2014 at 07:40

    I found this to be an encouraging sign that people are feeling done with the materialism that has shrouded our society for the last few decades. The planet can’t sustain our current consumption. I see people all around me, young families mostly, feeling sick of “stuff” and trying to simplify and downsize.

    I read two great books recently–Plenitude by economist Juliet Schor, which provides a new model for more fulfillment through less consumption and how the future of climate change will require such changes, and Zero Waste Home by Bea Johnson, about a family that throws away one quart of trash PER YEAR. Both are highly recommended. Less stuff! More contentment! More secure future for all!

  10. johnbebad says 02 April 2014 at 09:14

    I don’t buy it…. I couldn’t resist it…

    Honestly, I think its forced realization that the economy is nowhere near as good as it was before the crash or the preceding 30 years. That between changes in technology, globalization and work force productivity trends middle class America no longer has the spending capacity it once has. That being said I constantly see people overspending so I do believe their is a certain confirmation bias (as noted) by the author. Even though we save 30-50% of our income, I know way more people that save the bare minimum and also waste lots of money they could be saving.

    I try not to be fooled by our demographics as in the 10% income wise allows us to save easily and still have creature comforts vs. those in the bottom 50%, particularly the last quartile, that any spending on discretionary items (which happens often) erodes future financial security. I think PF people who write and comment on here in general are of 1 and/or 2 demographics. They are in the top quartile in incomes percentage and/or economically they tend to be frugal/pf wise or seek out ways to emulate the frugal/PF lifestyle to enhance their existence. Overall this demographic is a small percentage of the total population.

  11. Andrew says 02 April 2014 at 10:43

    I frequently feel like throwing a rock at the Internet.

  12. redstar says 02 April 2014 at 10:52

    Frugality is and will become the way for survival to combat stagnant wages and/or to avoid debt. I used to be an over-consumer and never saved b/c I was naive about the future. PF blogs like these have literally taught me another view that living in America has its price but we can learn to manage. Worldwide though the cost of living (esp. for housing) has skyrocketed so places like London, Vancouver, Hawaii have forced people to conserve whatever discretionary income they have. I do agree that people may be spending less and saving but more out of necessity, fear of financial insecurity in retirement, looming debts, and discovering that the material life does not fill the void… and knowing the world needs more conscious thoughtful purposeful consumption to benefit the planet.

  13. Teinegurl says 02 April 2014 at 13:02

    I have to say i think the enviroment also plays apart of the trend to “go green”. To be enviromentally concious is frugal such as recycling, reusing your water bottle , packaging your own lunch, bringing your own shopping bags. As the governmental laws change in regards to the enviroment it also helps individuals change and shift their habits. You no longer have so much trash and bulk in your life and that is cheaper.

    Growing your own veggies , or farmer’s markets where i live (hawaii) are cheaper than groceries especially for fresh fruits and veggies. It’s more cool to say look at all the stuff i got for $20 vs. I spent $100 on this fancy new gadget.

    I also think that job markets and the economy havent fully recovered so by people learning to make more with they already have that’s how they survive.

  14. El Nerdo says 02 April 2014 at 13:21

    Remember the ’90s? Remember Monica and Rachel’s sweet New York apartment? They even had a coffee shop downstairs, where they spent a lot of time and, presumably, a lot of money.

    Ah, yes, “New York without brown people.” I could never stand to watch that thing in spite of Aniston’s good looks, but it’s a standard TV practice to display larger/more luxurious digs than their characters could afford in real life. It happens everywhere.

    The only exception to this I’ve seen is in “The Knights of Prosperity” which was awesome and everyone should watch because it was truly hilarious and demented and Donal Logue is great and Sofia Vergara blows all “Friends” out of the water in the good looks department.

    Oh, I almost forgot– Raising Hope has been dealing with poverty for years now, and even though I can’t stand to watch it anymore, it was pretty good at the beginning– worth a look. But yes, Virginia Chance knows how to stretch a buck, ha ha ha.

    Fast forward to 2014, and we’ve got Girls, a show about broke twentysomethings who move back in with their parents, borrow money from their parents, and struggle to find jobs.

    Lena Dunham is a really good writer but again this is another show about faux poverty in privileged/gentrified/hipster settings. But it’s funny and pretty good at times. It also makes me glad the missus and I didn’t end up moving to New York– it looks horrible these days.

    And, maybe it’s a coincidence, but two of 2013′s most critically acclaimed movies, Nebraska and Inside Llewyn Davis, carry themes of hardship and futility. If art imitates life, I think we’re witnessing it.

    I watched Nebraska and thought it was bleak and awesome and everyone should watch it. Inside Llewyn Davis is a great movie I didn’t enjoy much— I wanted to punch the main character in the face, other people were equally horrible, and I couldn’t stand the musical numbers– but it’s a very good movie regardless of my preferences in music or people. And both show examples of TERRIBLE money management! Must watch.

    Alexander Payne and the Coen Brothers have always been into hardship, futility, and sheer human stupidity though–way since before the Great Recession or the recessions before.

    • Kristin Wong says 02 April 2014 at 13:31

      Dang you and your excellent points, El Nerdo. Actually, I’ve been taking in everyone’s thoughts on the matter and evolving my own. Your “faux poverty” phrase stands out to me. Because maybe what I’m noticing and reading about is just romanticizing poverty without truly understanding what it means to experience and overcome it. As someone else said, maybe people want the most bang for their buck without really thinking about their habits and behaviors. I dunno.

      I still like to think that, as a whole, we’re gradually recovering from our poor pre-recession decisions. But maybe the “shift” is mostly superficial.

      Also, it’s good to know I’m not the only one who hated Friends.

      • El Nerdo says 02 April 2014 at 15:55

        There are a couple of shows in recent times that show most of what’s broken with America these days: The Wire on the one hand, and Breaking Bad on the other.

        One is classic social realism and shows how conditions will overpower individual choices. The other is all about the individual, but the choices he’s presented in his cultural context are rather impossible and damning– Father Does Not Know Best.

        I think the illusion of the American Dream is over and people sense it one way or another– the future will not always be better for all, even if it can get better for some.

        The upside is that we can stop dreaming and start living in reality– not a bad thing at all…. By the way, if you want backyard chickens, this is the time of year to get pullets.

        • Kristin Wong says 02 April 2014 at 20:44

          “Money ain’t got owners, only spenders”

    • Ramblin' Ma'am says 02 April 2014 at 14:10

      OK, I know this so isn’t the part of the article–but I always see “Friends” held up as the ultimate example of “characters living an unaffordable lifestyle.” It actually was explained on the show that Monica had inherited a rent-controlled apartment from her aunt or grandmother.

      Obviously most people don’t luck into that kind of deal, but they did at least address it.

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