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
A 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 Couponing, Extreme Cheapskates and the Thrift Shop song. Pop culture even reflects our cynicism toward the one percent — Wolf of Wall Street, American 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 — Why? What'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.