2009-07-21

Americans Who Don't Spend

Now for the socionomics side of the deflation argument:
Here's a Switch: Americans Who Don't Spend
Her frugality was forced upon her when the Fulton, N.Y., accountant lost a $60,000 a year salary in 2006 and faced the frightening truth that she was unemployed with $41,000 of credit-card debt, two car payments and a mortgage that her husband's machinist salary alone couldn't cover.

"I didn't really pay attention to my debt," she said. "I always thought that I would pay it off later. But later came a lot sooner than I had planned."

Cash-Only Lifestyle

She's now in year two of a five-year program to be debt-free and is living on cash only. But here's the catch: When all the balances have been cleared and her savings is back to what she would consider a comfortable level, Case, 38, said she will not change the way she lives.

"It's liberating," said Case, who is now making about $45,000 a year in a job she loves. "I had a friend who said, 'You guys are poor.' I've never felt poor. I have to be really frugal now, but it's really all about needs. Do I really need that cell phone? Do I really need that new car?

"I'm happy with less," she added.

Welcome to the new "normal" where keeping up with the Joneses is so last millennium and living within your means is the new cool.
Anyone relying on the American consumer for their business needs to face the new reality. Though this is very bullish in terms of long-term recovery, this is not good for retailers and producers of consumer goods and services.

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