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Spending habits: Americans at all income levels tighten their belts

As a recession looms, signs of a new frugality emerge. Say goodbye to long trips and lattes.

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Although they could afford a 40-inch television, that's not a priority. "We don't feel that we have to have every new gadget or gizmo. We just don't move in circles where you're out of the loop if you don't have the right toys."

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That's the attitude Bob Glantz takes toward cars. He saves money by buying used vehicles that have been checked over by a mechanic. "The most expensive fragrance in the world is not Chanel No. 5 or Opium or White Diamonds, it's that new car smell," says Mr. Glantz, research director at Access Communications in Berkeley, Calif.

Three layoffs during three recessions – in 1981, 1987, and 1991 – taught Glantz the importance of putting money aside when paychecks are coming in. He advocates maximum payments to a 401(k), if possible.

He charges everything he can to an airline miles credit card and earns free flights. "My wife and I have taken a couple cross-country trips," he says.

They also enjoy inviting neighbors over to play cards and Scrabble. "You can have very good times at home for very little money," he says. Emphasizing that they do not have a "sackcloth, ashes, and gruel" lifestyle, he adds, "You can do things to be frugal without hardship."

Stacy Francis, president of Francis Financial in New York, finds that many of her clients are "digging a little more deeply in their soul," asking whether their spending really reflects their values.

"For most people, where they're spending their money has little or no correlation to what's really important to them," she says. "They're really surprised at the amount they're spending on things that don't really matter, that don't add to their happiness."

To help people achieve financial security, Ms. Francis suggests a five-step plan:

First, conduct a full analysis of where you're spending your money. Second, list what your real values are. What is important in life to you? Third, look at whether your spending reflects your values. Fourth, change your spending to bring it in line with your goal of achieving financial security. Fifth, evaluate your finances every six months to be sure you are on track.

In general after a recession, patterns of spending and saving vary widely by age and stage of life.

"When things get better, those in an older generation are more likely to continue to be prudent, because they know it can be lost in a minute," says Alice Simon, professor of economics at Ohio Wesleyan University. "Those in a younger generation are more likely in good times to continue to spend. They've never really had to suffer."

Even so, when the good times roll again, Palmer hopes to maintain her financial goals. Pietryla expresses similar determination.

"I just feel better," she says. "My stress level is less intense. I'm focusing on that shift in values. I'm prepared if anything happens. It's the best sleep I've ever had."