Save Vs Spend Two Way Street Signs Point to Fiscal Responsibilit

Navigating The Mixed Messages Of Our Consumer Culture

Tuesday, September 20th, 2011

If you’re really paying attention, life can be a very odd experience.  Especially when it comes to money.

For example, in troubled economic times like these, front-page newspaper stories regularly quote economists expressing concern that the personal savings rate is going up.

I still vividly remember reading one such story during a previous recession.  I had to blink my eyes and reread an economist’s comment.  Sure enough, he was deeply worried that people might start saving more.

Flip past the headlines to the personal finance section of your paper and you’ll find columnists regularly sounding the opposite alarm: Americans aren’t saving enough!

So, who do we listen to?  The economists who seem to think it’s our duty to spend more for the good of the country?  Or the personal finance writers who say it’s in the best interests of our families to save more?

It’s easy to feel as lost as Neo in “The Matrix Reloaded”: “I just wish I knew what I am supposed to do.”

A Simple, Radical Idea

A long time, I remember thinking that we would all be a lot better off if we would simply build a strong base of savings and then buy what we need and want out of that.

It’s such a simple idea.

Save for a vacation and then take a vacation that we pay for out of savings.  Save for a car and then buy a car with cash.

So simple, and yet so rarely practiced.

Instead, we’ve bought into the lie that we are consumers, and consumers can’t be inconvenienced by waiting.  Consumers need to Buy Now!  Delayed gratification? Too much work.  Besides, you only go around once, you know?  Better grab for all you can right now.  And look!  As luck would have it, it’s all on sale.  We can get the computer, the car, the cruise of a lifetime – all for no money down and no interest payments until…

The Opportunity of Today’s Recession

Back when I first had my quaint little idea about saving and then spending, the economy was very strong.  I remember thinking that if everyone suddenly started saving more, the fears of front-page economists would, in fact, come true.  We’d go into a recession.  There would be some pain, but it had the potential to be short-term pain that brings about long-term gain.

Once people had a healthy savings account and were in the habit of regularly saving a sizable chunk of their pay, they could use a portion of that savings to buy the things they had been putting off.

We’d go back to buying stuff again, but we’d do it differently.  We’d go from wanting something, getting it, and then paying for it over the next several years along with a bunch of interest to wanting something, saving for it while earning interest, and then getting it.

Our household finances would be much stronger, and I’m guessing that our country’s finances would be stronger as well.

That’s the opportunity we have right now.  We’re in a recession.  We’re in pain.  Whether it becomes short-term pain that leads to long-term gain depends on what we do next.

Will We Learn From This Recession?

Unfortunately, there are lots of warning signs that we’re headed back to our spendthrift ways.

According to US News, “Consumers are racking up debt again at an alarming rate.”

An analyst in the same article said, “I think it’s a good indicator that we’re moving in the right direction.”  That’s exactly the type of ridiculous comment that keeps us playing along as the great Oz of our consumer culture pulls the levers.

On the heels of that article came news that Citigroup just mailed nearly 350 million credit card offers – more than one for every man, woman, and child in the U.S.  Do you think the company senses some pent up desire to spend?

How to Reset Your Economy

The pull of our consumer culture is as strong as a riptide.  But all is not lost.  There’s hope, if we do the right thing at home, and if we demand that others who have influence over us do the right thing as well.  Here are two steps that would make a huge difference:

Plan to succeed. In workshops I lead around the country, I’m noticing a little more willingness to use a budget, although it’s still a tough sell.  Use my recently revised Budget Quick Start Guide, along with my Recommended Spending Guidelines (found at the same link), to put together a Cash Flow Plan.  There’s no better tool for helping you live within your means while being generous, building savings, and ditching debt.

Also, review the habits of money-smart people I described in a post entitled, The Case Against Frugality.

Stop sipping the Kool-Aid. We are not consumers, and we are not puppets on a string, so let’s lobby our politicians and the companies we do business with to stop referring to us that way.

“Consumer” is a demeaning label.  It literally means to use up, squander, and spend wastefully.  To be a consumer is to be a pawn.  Politicians sit around talking about what they can do to prop up consumer sentiment and prompt more consumer spending.  Businesses strategize on how they can best reach certain consumer segments.

It’s as if they’re playing a game of pinball, trying to time the flippers to keep us bouncing from store to store.

Let’s demand that politicians go back to what they used to call us before the Industrial Revolution: citizens.  And let’s demand that the companies we do business with refer to us as customers.

This may seem like a little thing, but I believe a wholesale shift in our identity would do much to change the expectations of how we manage money, and that would foster better actual behavior.

It might put an end to short-sighted thinking in Washington that leads to short-term economic “fixes” designed to get us to spend money we shouldn’t spend.  And it might get us to read the contract before signing on for a mortgage that eats up half of our monthly income.

Who knows?  It might even lead to a day when a healthy savings rate is applauded on the front page of the newspaper just as often as it is in the personal finance section.

What steps are you taking to use this recession for good?

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Categories: Planning, Psychology of Money, Saving/Investing, Smart Spending

3 Responses to “Navigating The Mixed Messages Of Our Consumer Culture”

  1. I have to agree. Just the other day I was pondering the idea that economists are hoping consumers start borrowing again to help the economy recover. Isn’t that kinda what got us here?

    As the wife of a small retail business owner, I get it. I *wish* people had more money to buy our products but I would rather they buy because/when they can afford to. It’s a painful reset for our economy but you are right–let’s go back to being citizens, not consumers.

  2. I’m very happy to see the Personal Savings Rate is still above 5%. It was well over 10% in the 70s and 80s and the economy did just fine.

    The country still has a ways to go to deleverage from all of the past debt and to save at a rate that provides security for families. But, at least we are headed in the right direction. Now, if we could only get the government to follow.

  3. When people have more money coming into their budgets via jobs, what will they do? It depends on the economy as they see it. If they think the economy is strong and secure they will feel better about their income as being something they can count on in the future. They will save less and spend more. When they think their jobs are not very secure due to the shaky economy they will save more for the uncertainty. It would be nice if everyone could/would save for an item before purchasing it, but old habits die hard!

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