I have been talking about frugality for quite some time. Here is a partial list.
- March 23: A New Phenomenon: Haggling Over Prices
- April 24: Cool to Be Frugal
- August 10: The Future Is Frugality
- August 26: Frugality Is The New Reality At Citigroup
New Age of Frugality
Frugality has finally made front page. BusinessWeek is commenting on The New Age of Frugality.
On a shady lane in New Hope, Pa., a quiet revolution in American culture may be taking shape. Here, a family of four lives in a white, colonial-style house in a manner that once would have been considered All-American but more recently has been seen as just plain weird: They’re frugal.
Meet Leah Ingram, Bill Behre, and daughters Jane, 13, and Annie, 11. They walk most everywhere, they rarely eat out, they sometimes buy clothing at consignment shops, and they turn the lights off when they leave a room.
Theirs is no hard-luck-in-a-recession story. The Ingram-Behre family is solidly middle-class, fully employed, and not especially threatened by the conniptions gripping Wall Street. Behre, 43, is a dean at the College of New Jersey, while Ingram, 42, is a successful freelance writer and etiquette expert. They have no credit card debt.
Ingram and Behre are harbingers of a dawning Age of Frugality. People who overconsumed during the past decade are now rejecting extravagant lifestyles. They’re spending less, and more wisely. Some are getting their finances in order. Others are fearful of losing their jobs, shocked by investment losses, or hunkering down amid the general uncertainty.
The penny-pinching is already showing up in the numbers; this quarter could mark the first fall in personal consumption in 17 years. And with credit tight and Americans loaded down with $2.6 trillion in personal debt, consumer borrowing dropped in August, the first such contraction since 1991. Menzie D. Chinn, who teaches economics at the University of Wisconsin, figures consumers won’t be in a position to spend freely for five years.
As joblessness creeps up, many more Americans will receive their own crash course in frugality. It has already happened to Ned Penberthy, 53, a salesman who lives in Pelham, N.Y. He recently got a new job, took a cut in base pay, and has been living the frugal lifestyle ever since. Penberthy says he’s in it for the long haul—willing to spend more up front to reap savings over the next several years. He installed expensive but energy-sipping CFL light bulbs in his house, and replaced some of his appliances with more efficient ones. For him, every penny counts. For instance, he switched from shaving cream to a bar of shaving soap. He figures he saves $6 a year that way. “It’s not much, but there’s a psychological benefit,” he says.
Like a lot of boomers, Penberthy has a nest egg, but many people in their 20s and 30s have little to fall back on. To get on track, they have to learn the difference between necessities and discretionary spending. “They need to go back to [psychologist Abraham] Maslow’s hierarchy of needs—food, clothing, shelter, and transportation,” says Kristine E. Miele, a financial planner. She’s offering “Lessons for Life” classes, gradually weaning young people off their spending habits one luxury at a time.
BusinessWeek has an accompanying article on Turning Finances Around.
Most of what Leah Ingram has to say is just plain common sense about living within one’s means. Better yet is to live beneath one’s means and save the rest for the proverbial rainy day. Leah has a blog called The Lean Green Family that some may wish to visit, subscribe to, or share tips.
I tried to get in touch with Leah but there was no way to do so. I cannot fathom having a blog with no contact button, but I see it all the time. If you are blogging and do not have a contact button, my advise is to get one.
Magazine Cover Indicators
Often times magazine covers are contrarian indicators. In this case what we are witnessing is the very beginning of the recognition phase. Frugality is after all just starting. This is a secular shift that will play out for years to come, more likely decades.
I have a few of my own frugality tips to offer. Number one on the list is get an appropriately sized freezer. I grew up in a family of six and we had a big freezer on the back porch. Mom would buy whatever meat was on sale and my dad would wrap it in freezer paper, label it and store it in the freezer. Meat properly wrapped will easily keep 6 months or even a year without getting freezer burnt.
The second thing to do, much easier if you have a freezer is to only buy meat that is on sale. Chicken legs on sale where I shop are $.69 lb, regular price is $1.29. Center cut pork chops on sale (I just bought some) are $2.19 lb, regular price is $5.49 lb.
You can find value packs of pork chops for $1.49-$1.59 lb if you want to save even more. If you go this route, carefully look at each package. Invariably you will find that they put two center cut chops on the top, two partially hidden chops underneath, and two very difficult to see and guaranteed to be poor quality chops on the bottom. The trick is to find a package with reasonable looking chops partially hidden (with practice it is not that difficult) and the two bottom chops are essentially free. There is nothing wrong really with those bottom chops, just that there will be a lot of bone on them.
Another thing you can do is buy a center cut pork roast on sale and have them slice it for free into whatever thickness chops you want. The same holds true for standing rib roast (prime rib). Why pay $9.98 lb or more for prime rib or rib steaks when you can get it on sale for $4.98 lb. When they are on sale, I may buy 4 of them to freeze. That may be as much as $15 savings on each one.
Most do not know this, but stores with a butcher shop will grind hamburger for you for free. Ground chuck might be $2.79 while chuck roast on sale might be $1.79 or less. Pick out some roasts and have the butcher grind them for you. Individually wrap beef patties in cellophane and freeze them.
Cheese keeps well and you do not even have to freeze it. If you are paying full price for cheese you are throwing money away. I hardly buy anything except vegetables and bagels that are not on sale. I love the sesame bagels at Dominicks (Safeway). Dominicks actually makes them in the store fresh unlike other places.
Every Thanksgiving, turkeys are on sale for incredibly low prices. Buy one or two extra and freeze them. Have an Easter turkey instead of ham. And when it comes to ham, you are better off paying a bit more for a butt ham than a shank ham.
I am expecting unemployment to hit 7.5-8.0% next year and I may easily be an optimist with those numbers. If your job is remotely at risk, please do what you can to prepare for it. For those out of a job, frugality is already a reality. For those about to lose their job, it will be a forced reality.
Those wondering why the Fed and Treasury liquidity measures are failing, need look no further. Greenspan had the wind of consumption at his back. Bernanke is on the backside of Peak Credit with a breeze of frugality blowing briskly in his face.
Mike “Mish” Shedlock
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