Article: Waste not, spend not or spend a lot
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    Registered User FreesiaE's Avatar
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    Default Article: Waste not, spend not or spend a lot

    Here is an interesting article about where our spending priorties lie:

    A walk through a suburban neighborhood on trash pickup day reveals an awful lot about American culture. We discard a lot of stuff -- TVs and radios, ironing boards, paintings, computers, doors, cell phones.

    Has ours become a throwaway society? Maybe we should be conserving our resources. On the other hand, a big part of the U.S. economy is driven by consumer spending. Every new cell phone, plasma TV, car or upgraded computer means jobs for somebody ... somewhere.

    Ranji S. Dighe, associate professor of economics at the State University of New York, says, "I know that consumer spending is 65 or 70 percent of the gross domestic product, so clearly spending is extremely important for the economy."

    So have times changed? Have our attitudes, about spending versus saving and fixing old versus buying new, changed? During World War II, Americans were encouraged to conserve, save and economize. After the events of Sept. 11, President George W. Bush encouraged people to go out and spend money. Have our values turned 180 degrees? And how does that affect how we spend and save?

    "In World War II," says Dighe, "it was a patriotic duty to save. During the Great Depression, spending definitely would have been welcomed. ... In World War II the emphasis on savings and thrift was necessary because the entire economy was geared toward the war effort, so we had to shift from consumer goods to war production. Whereas what happened with Sept. 11 -- yes, we have been at war. But it's not quite the same full-scale war as World War II. The war isn't consuming so much of our resources that we can't afford to go out and consume."

    Technology saves money
    Over the years, several forces have influenced Americans' attitudes about money. One is technology, which we have come to take for granted. For instance, it's downright unusual not to see someone talking on a cell phone today, no matter where you go.

    Dorothy Holden, 81, of Nashua, N.H., says, "I think we had a very different view of spending when I was younger. One of the things I remember was, on the very rare occasions when anybody made a long-distance telephone call, which was quite expensive in those days, you had a three-minute egg timer that you turned up as soon as you started the call, and at the end of that three minutes you just said goodbye."

    Long-distance calls have become a necessity, not a luxury, and technology has made it easier, more convenient and cheaper.

    Mo' flow
    Two-income households are the norm now. Whether that's by necessity or choice, the result is an overall increase in family income.

    "I think there are more two-income families, and perhaps that generates more of a reserve," says Julie Burns, 44, of Harrisburg, Pa. "Perhaps it's just as the baby boomers age, there's a large group of people in their 40s, 50s and 60s who are beyond the family financial obligations and have money to spend."

    Debt-level acceptance
    One thing seems clear -- people are more willing to be in debt today than previously. Shannon Surly, 34, of Waterloo, Iowa, says, "I am baffled to see people in my age bracket who are able to go out and buy a new car every year, who go out and buy $250,000 houses. I think they're in debt up to their eyeballs."

    They probably are. Paul Laviola, a certified financial planner with Financial Planning Solutions Inc., in Media, Pa., says, "A big problem is the easy access to credit and credit cards. With the previous generation, getting credit was difficult. Today it's a matter of filling out a credit card form or going on the Internet. People are in an unimaginable amount of debt. And not just low-income people but wealthy people, too. All along the spectrum. And I think it's the easy access to credit that's the driver. Before you didn't have that."

    In fact, in the United States consumer debt is at an all-time high. Certified financial planner Stacy Francis of Francis Financial says, "The savings rate is actually negative. I know it sounds odd. How can a savings rate be negative? But it's actually because a lot of people are spending more than they're earning. And the real question is: Why are we doing this? Why are we buying things we can't necessarily afford?"

    Francis thinks two major factors lead to overspending -- power and happiness. "I think there's a real problem with the misconception that having the power of spending equals your value. There's almost an equation that having money plus spending it equals power. What people can buy also really impacts their confidence."

    Who, after all, hasn't gone shopping to celebrate a good day ... or a bad one?

    Second, says Francis, people still think money can buy happiness. "The more money you have, the more you can spend, the happier you'll be. And that's something that is definitely not true."

    Francis cites a study conducted by economist Richard Easterlin at the University of Southern California. He found that the amount of money people needed to make them happy was $40,000 a year. Once basic needs were met, increased money didn't really change how happy people actually were.

    Needs change
    At one time, needs -- versus wants -- were relatively simple: shelter, food and water.

    As more and more goods were produced, "needs" became more complicated and included things like telephones, hot and cold running water, TVs and today, cell phones, iPods, high-speed Internet and two cars. Not just a chicken in every pot, but a high-definition, flat-panel TV with surround sound in every room. Society changed and so did our needs, or at least our perceived needs.

    "When I grew up it was, 'What did you need?'" says Carol Noreen, 52, of Madison, Wis. "Now [young adults] need a computer and they need a cell phone and they need digital cable access. Where did this concept come from that these things aren't luxuries anymore, that they're things you need to exist in society?"

    Of course, maybe our "needs" haven't changed. Maybe manufacturers and their advertising agencies have convinced us -- quite successfully -- that we need these products. Besides convincing us that we can't possibly be hip, cool, powerful or happy without these products, there is a peculiar sort of built-in obsolescence.

    "It's a neat concept," Dighe says of built-in obsolescence, "but I doubt there's very much of it in American manufacturing, and here's why. So much of our manufactured goods come from China and Taiwan and other places in the world. Unless producers all around the world believe in planned obsolescence, it just isn't going to pay for American producers to make products that just break down and have to be replaced, because consumers will just stop buying them and start buying more-reliable things produced elsewhere.

    "I think you probably do have considerable obsolescence, not in a literal sense, but in a marketing sense, replacing things that are new and trendy."

    Financial attitudes and how they affect you
    Ultimately, our attitudes about money affect the quality of our lives. How we spend, whether we perceive buying things as gauges of our self-worth and whether we're going to save enough money to retire may depend largely on how we were raised and how we react to how we were raised.

    "Some things I think are generational," says Carl Brookins, 73, of Minneapolis. "I think a lot of it has to do with attitudes and how you grew up and what your parents are like and the people around you. There are a whole lot of influences. In general I think our society has become much more of a throwaway culture, and we tend to replace rather than repair. Of course, it's so expensive to repair a lot of things now that it makes more sense to go and buy a new one."

    Francis says, "I see the problem with spending among all different ages, and that's definitely a bridge that bridges all different generations. A lot of it doesn't have to do with what generation you're from, it's more about how they were raised and what they were taught about money. Did their parents spend frivolously? Was there a competition with the Joneses next door? How were they taught about money? And how they formed their attitudes and beliefs and values about money is what stays with them the rest of their lives. It's much more about that than it is necessarily about age."

    When working with clients to get their finances under control, Francis says she attempts to help them determine what's important to them.

    "If it's security, we take that one step further and ask what will help them feel secure. Maybe it's purchasing a home. It may be having a certain dollar amount in their emergency fund. It may be putting a certain amount away for retirement. And we make sure we do that first, and then whatever's left over, you can have a ball with. Then there's less of this constant tug of war between their spending and their values."

    "How did we do it before having a cell phone?" says Laviola. "I can't imagine it today. And it seems like we're going down that slippery slope of: We need to have a cell phone. I couldn't imagine watching TV on a black-and-white 19-inch. Can you?"

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    Thanks freesia, that was very interesting.

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