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The New Frugality  
User currently offlineDougloid From , joined Dec 1969, posts, RR:
Posted (5 years 9 months 3 weeks 2 days 2 hours ago) and read 1492 times:

This notion seems to be a theme that is emerging from the wreckage of the American economy that it's OK to be thrifty-not a real skinflint, mind you, but that rampant, spend for the sake of spending money you don't have may have run its course.

The Arizona Republic tells us that this is, indeed the case.

http://www.azcentral.com/business/ar...20081126biz-pulse1130intro-ON.html

I was chatting with the teller at the driveup window at the credit union this morning and she'd mentioned that she'd been out early to take advantage of the bargains that are out there, and
I said that I was going to be practicing New Frugality this year-I wasn't going to buy anyone anything, and I was going to tell them that it was to develop their moral character.

What do you think? Am I on to something?


 Wink

14 replies: All unread, jump to last
 
User currently offlineN867DA From United States of America, joined May 2008, 1008 posts, RR: 0
Reply 1, posted (5 years 9 months 3 weeks 2 days 2 hours ago) and read 1488 times:

I was listening to the radio and a SunTrust ad cheered me up quite a bit. It starts out talking about how everyone tries to keep up with the Jonses and points out that all their "stuff" is not always good. The ad then goes to talk about the bank that promotes "Solid Ground" financially.

This is a welcome change from the TAKE OUR LOAN! IT'S FREE MONEY! IN FACT WE'LL GIVE YOU A LOAN ON TOP OF YOUR LOAN! ads from the past few years.



A nation turns its lonely eyes to you
User currently offlineVonRichtofen From Canada, joined Nov 2000, 4627 posts, RR: 36
Reply 2, posted (5 years 9 months 3 weeks 2 days 2 hours ago) and read 1469 times:

The scary question is: Can the American economy afford the "new frugality"? Sounds like a bizarre question, but I heard that some 70% of the US economy is based on consumer spending, where as in the 1930's it was less than 50%.

An economy dependant on people buying crap they can't afford with borrowed money is worrying.



Word
User currently offlinePPVRA From Brazil, joined Nov 2004, 8964 posts, RR: 39
Reply 3, posted (5 years 9 months 3 weeks 2 days 2 hours ago) and read 1459 times:



Quoting VonRichtofen (Reply 2):

An economy dependant on people buying crap they can't afford with borrowed money is worrying.

Question is, can China afford it?

The U.S. needs to go back to producing stuff and this New Frugality, so to speak, is exactly what is needed. Some more re-adjustment pains are sure in order, though.  Sad It's painful to get off from under a pile of debt, but the future is brighter. And a debt-free U.S. is much better for China and the world, too, even if there is some pain in the near future  Smile



"If goods do not cross borders, soldiers will" - Frederic Bastiat
User currently offlineDougloid From , joined Dec 1969, posts, RR:
Reply 4, posted (5 years 9 months 3 weeks 2 days 1 hour ago) and read 1439 times:



Quoting VonRichtofen (Reply 2):
The scary question is: Can the American economy afford the "new frugality"? Sounds like a bizarre question, but I heard that some 70% of the US economy is based on consumer spending, where as in the 1930's it was less than 50%.

At the risk of sounding like a broken record, m'good fellow, we are not, as it happens, the only people who have acquired this....ahem....perpetual consumer malaise. Last I heard it was worldwide, although we may have taken it to it's natural limit.


Out in front, all the time-that's Uncle Sammy, at least until now.

However, the way I see it is that being free of consumer debt provides one with a certain amount of autonomy and liberty, which is a good thing-I have always known that.

Live free or die, as they say in New Hampshire.


User currently offlineArrow From Canada, joined Jun 2002, 2676 posts, RR: 2
Reply 5, posted (5 years 9 months 3 weeks 1 day 23 hours ago) and read 1404 times:
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Quoting Dougloid (Thread starter):
What do you think? Am I on to something?

Or maybe just on something?

I hope you've identified a trend that will take root and spread worldwide. As a consumer who has zero debt (mortgage burned years ago), pays his bills on time every month, and never buys anything I can't pay for, I was beginning to think I was a vanishing breed.

On the other hand, you can get trampled to death at Wal-Mart on Black Friday if you're not careful. It's a sad legacy for the entire western world that we all have so much discretionary income (or a willingness to go in hock up to our eyeballs) that shopping has become an entrenched recreational pastime. Whatever happened to going for a walk?



Never let the facts get in the way of a good story.
User currently offlineDougloid From , joined Dec 1969, posts, RR:
Reply 6, posted (5 years 9 months 3 weeks 1 day 22 hours ago) and read 1376 times:



Quoting Arrow (Reply 5):
I hope you've identified a trend that will take root and spread worldwide. As a consumer who has zero debt (mortgage burned years ago), pays his bills on time every month, and never buys anything I can't pay for, I was beginning to think I was a vanishing breed.

On the other hand, you can get trampled to death at Wal-Mart on Black Friday if you're not careful. It's a sad legacy for the entire western world that we all have so much discretionary income (or a willingness to go in hock up to our eyeballs) that shopping has become an entrenched recreational pastime. Whatever happened to going for a walk?

I think your New Frugalist is kinda like a drunk at their first AA meeting. I'd like to say I could torch my mortgage (I can't) but we did dig ourselves out of credit card hell last year and we're not going back again. Doing that is why we have a mortgage in the first place.

On the other hand I have never cottoned to the idea of being perpetually in hock for something or other, and by the time it's paid for something else even more expensive replaced it.

Now. Having said that you can pay off your card every month and thus get the use of Visa's money for nothing but it is a rare person who can pull that off for an extended period of time. Getting out of hell took five years of not going anywhere, not doing anything and pretty much staying home.

We live simply. I drive a 20 year old pickup truck, and I have not made a car payment since 1992. We mostly eat at home, we don;t smoke and rarely drink. We don't do concerts and we don't rent DVDs and we don't buy things to buy them When we spend money we get good value, and what we buy is practical, no nonsense stuff. The last big purchase was a 95 per cent efficient gas furnace that is just now starting to show signs of paying big dividends.


User currently onlineRayChuang From United States of America, joined Jun 2000, 8016 posts, RR: 5
Reply 7, posted (5 years 9 months 3 weeks 1 day 20 hours ago) and read 1351 times:

I think this is the time we take another look at our Federal income tax system.

The problem with the income tax system is not only does it punish the incentive to save and invest by taxing savings interest income, dividend income and capital gains income, but its very complexity gives all the incentive to cheat and legally "offshore" assets to keep it out of the clutches of the IRS.

That's why I prefer a true consumption tax system to replace the income tax system. One proposal, FairTax, replaces all current income taxes with a 23% national sales tax combined with a monthly "prebate" payment to compensate for the 23% tax up to the federal-defined poverty level (amount of payment depends on marriage status and number of dependents in family). Because there are no taxes on earning money, this encourages people to save and invest their hard-earned income, and it means because there are no tax withholding on paychecks income earners can actually save up to buy big-ticket items like a house or automobile with a cash payment or with a substantially smaller loan (since consumers can now afford bigger down payments).


User currently offlineDougloid From , joined Dec 1969, posts, RR:
Reply 8, posted (5 years 9 months 3 weeks 1 day 19 hours ago) and read 1307 times:



Quoting RayChuang (Reply 7):
That's why I prefer a true consumption tax system to replace the income tax system. One proposal, FairTax, replaces all current income taxes with a 23% national sales tax combined with a monthly "prebate" payment to compensate for the 23% tax up to the federal-defined poverty level (amount of payment depends on marriage status and number of dependents in family). Because there are no taxes on earning money, this encourages people to save and invest their hard-earned income, and it means because there are no tax withholding on paychecks income earners can actually save up to buy big-ticket items like a house or automobile with a cash payment or with a substantially smaller loan (since consumers can now afford bigger down payments).

Ordinarily I'd agree with you Ray, but if the past fifteen or twenty years has shown us anything in the US it is that we hear this all the time: "Oh, just get government off the backs of the real earners and they'll invest it for the good of us all, just you wait and see."

the reality is that much if not all of that's gone into consumption-McMansions, vacation condos in Costa Rica, timeshares in Aspen, Lexii, Lincoln Navigators etc. Very little income gets saved or invested.

It's the trickle down economics whore in a brand new dress is what it is.


User currently offlinePPVRA From Brazil, joined Nov 2004, 8964 posts, RR: 39
Reply 9, posted (5 years 9 months 3 weeks 1 day 18 hours ago) and read 1296 times:

Quoting Dougloid (Reply 8):

With high taxes on all kinds of returns, the government pushing interest rates to record lows, inflation creeping up, there is little incentive to save. The wealthy are probably simply moving their wealth overseas.

[Edited 2008-11-28 20:58:18]


"If goods do not cross borders, soldiers will" - Frederic Bastiat
User currently offlineLTBEWR From United States of America, joined Jan 2004, 13113 posts, RR: 12
Reply 10, posted (5 years 9 months 3 weeks 1 day 17 hours ago) and read 1264 times:

It will be difficult for many to unlearn the extreme consumption patterns Americans have. Part of that will come from hopefully tighter credit in the future, stricter qualifications of steady income and debt limits for credit cards and loans, requiring 10% or more down payments on a major purchase like homes and cars. The media will have to stop glorifying the idea of owning or consuming more equals power and or happiness in movies, tv shows and advertising. Many will have no alternative but to live simpler lives. I have lived in tough times in the 1960's as a kid with my father on strike, having to get a new job as his old one became obsolete, dealing with expensive crieses, then as a young adult in college and afterwards in the long recession the occured during most of the 1970's. I had to live for 18 months not working full time in recent years. My savings along with unemployment insurance and my living style below my income for many years saved me.

As to tax law changes, I would suggest that one or families with incomes below $150,000 should not have to pay taxes on interest and dividends on a sliding scale of 3 to 5% of their salary. That way the money you make on basic 'rainy day' savings or for that house down payment or maybe from that couple 100 shares of stock you got from a relative or from your employers isn't sucked up by taxes. On the other hand, taxes should be increased to discourage short-term profiteering as to residential property and stocks to discourage excessive price increases that lead to bubbles and running out of buyers.


User currently offlineDougloid From , joined Dec 1969, posts, RR:
Reply 11, posted (5 years 9 months 3 weeks 1 day 17 hours ago) and read 1256 times:

As far as tighter underwriting requirements for mortgages that was already in place when we got our mortgage in April of this year. Jump through hoops we did, employment verification, five years worth of tax returns, a fairly solid down payment, a good solid credit score no lending above appraised value
and a good solid inspection on top of it. The employment verification was a pain in the ass because I'm self employed and have two part time jobs that provide much of my income.

It's coming down the pike folks. If the government is going to bail out the banks their glory days are over. Would you like to have the feds looking over every shoulder in your shop?


User currently offlineArrow From Canada, joined Jun 2002, 2676 posts, RR: 2
Reply 12, posted (5 years 9 months 3 weeks 1 day 17 hours ago) and read 1243 times:
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Quoting Dougloid (Reply 6):
Now. Having said that you can pay off your card every month and thus get the use of Visa's money for nothing but it is a rare person who can pull that off for an extended period of time.

Well, we've managed to do exactly that for nearly ten years now, and had a passel of free flights with the airmiles at the same time (just booked a Vancouver-Geneva flight last week on airmiles). But we didn't do (or buy) a lot of stuff in those months when it was pretty tight -- and there were lots of those.

Quoting LTBEWR (Reply 10):
It will be difficult for many to unlearn the extreme consumption patterns Americans have.

You're right -- and not just Americans. But it will happen because there won't be any choice. The easy credit days are gone.



Never let the facts get in the way of a good story.
User currently offlineFlighty From United States of America, joined Apr 2007, 8535 posts, RR: 2
Reply 13, posted (5 years 9 months 3 weeks 1 day 16 hours ago) and read 1231 times:

Quoting Dougloid (Reply 6):
but we did dig ourselves out of credit card hell last year and we're not going back again. Doing that is why we have a mortgage in the first place.

Good for you!

I have to live very frugally these days and it is hard. Been used to the very good life and right now my life choices cut the income wayyy down to almost nothing. It is possible to exist. But yeah, suddenly $100 is "don't spend it all in one place" money. Not being a very good "holiday American" this year, afraid.  

Quoting VonRichtofen (Reply 2):
An economy dependant on people buying crap they can't afford with borrowed money is worrying.

Those worries are coming true. But it's the result of our own good fortune and the choices we have made. We wanted easy credit and we got it. This crisis is part of that experience. This crisis isn't a "new reality," it is the caboose from the train we have been riding for a long time. There is nothing new about this crap. We should take ownership of where we are now. This is where we were headed. Now we're here! Now what?

Haven't heard too many good ideas of what to do now. To say "we need freer flowing credit" seems to me a little crazy. We could save more of our income and not spend. That will ironically shrink our economy (which is largely spending based) but it will curtail imports as well. Maybe what we need is to encourage American exports, "frugal" living and some other stability enhancing measures (such as a federal risk dept to analyze our economic hazards). The situation is so big though. It is hard to imagine all the things going on.

[Edited 2008-11-28 23:24:08]

User currently offlineDougloid From , joined Dec 1969, posts, RR:
Reply 14, posted (5 years 9 months 3 weeks 1 day 6 hours ago) and read 1168 times:

Well, Flighty, what we're seeing is a reprise of the old lesson that people are starting to relearn. Some will go kicking and screaming, some will go quietly, but go they will-of that you may be sure.

I've been hearing people kvetching that this newfound reluctance of people to pull the pin on big purchases, Carnival cruises and such like they used to is going to put a lot of other people out of work or in reduced circumstances.

There doesn't seem to be much doubt about that, and I expect a shakeout in retail and consumer based industries and hard times for a lot of folks. Unemployment's likely to go up and stay up for quite a while, and maybe some folks will get to thinking that maybe hanging drywall or working in a meat packing plant is better than sitting on your ass waiting for the phone to ring, because if it does ring it's likely the bank wondering when you're going to pay your mortgage or some collector grinding you about your overdue Mastercard.

And, be it remembered a lot of undeserving pricks and jumped up wannabe nouveau riche are getting a long overdue comeuppance and are now running around like the New Victims looking for a handout. Reverend Ike and the gospel of prosperity may get a thumping reminder that there is what belongs to G-d and what belongs to Caesar and it's best to keep them separate.
My old man used to say it was not a good idea to rise too far above your station in life and I guess he was right.

Will Rogers once said that America would be the first country ever where people went to the poorhouse in an automobile. Today it may be in a leased SUV that's in imminent danger of repossession.


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