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Has the Recession Changed You?

Posted on | May 13, 2009 |

I’m sure most of us have been affected by the recession, but how many have been fundamentally changed by it?

According to a Money Magazine survey (May, 2009), it has not only changed us but the changes will be permanent:

How we’re feeling.

54% say they’re worse off than a year ago and many worry about the next 12 months.

  • 30% worry they will lose their home
  • 52% worry a household member will lose their job
  • 55% worry a household member will take a pay cut.

Men vs. Women.

More women than men (49% to 35%) believe the U.S. economy will be better a year from now, and more men (47% to 29%) believe the economy will be worse in the next year. It would seem that men are more pessimistic (some would say realistic), but they also seem more self centered:

When asked who will be affected more in the long term?

  • 57% men said “me”
  • 55% women said “my children”

Maybe this reflects the natural tendency of women to show more concern for their offspring? I don’t know, but I found it interesting.

How we’ve changed.

  • 89% say they’ve changed how they manage their money.

No surprise here. You’d have to be pretty unconcerned with things to not change in some way. They go on to list 3 new habits:

  • 65% eat more often at home
  • 58% cut back on luxury purchases
  • 61% look for deals and discounts when buying

This is not wholly surprising, but I would think looking for deals is a good habit even when times are good. Also, some might consider dining out a luxury purchase.

  • 70% say  their financial values and priorities are changing.

More frugal:

  • 63% plan to save more than ever before
  • 63% plan to no longer carry a credit card balance.

These are good things indeed, maybe not for the economy in the short term but certainly for the economy and society in the long term. I would also speculate that most Americans never thought about a plan prior to this.

More averse to risk:

  • 63% accept less gains for less volatility
  • 52% think they’d be better off with money in under their mattress than in the stock market.

This is a problem. It’s a common problem, but a problem nonetheless. The money under the mattress will be worth a lot less after inflation, and the risk in the stock market is much less than it was a year ago. Part of the problem may be that people are thinking short term as well as letter their emotions (fear) take over their decision making. It will only hurt them in the long run.

Less materialistic:

  • 63% feel it’s less important to buy the newest “stuff”.
  • 59% feel guilty when buying non-essentials.

Buying less stuff is good! I’m not sure the guilt is a good thing… I believe in moderation. But if it takes guilt for some people to moderate their behavior, then so be it. :)

  • 94% say the economic crisis will have a lasting effect on how they manage their money.

The survey goes on to point out various attitudes about money that respondents say have changed. Call me a cynic, but I think most people are saying this because it’s all very real to them now. If the economy, or their personal fortune, rebound sufficiently I believe most people will go back to their old ways.

How I’ve been affected.

How I’m feeling.

Count me in the segment who is worried about a job loss. My company was acquired by an international corporation 2 years ago and some of their decisions of who to lay off don’t add up. This always worries me because if I understand the rationale for a decision, I can plan around it. For example, if management is looking to wind down certain projects, then I can try my hardest to become a part of more favorable projects. However, when management says a certain project is the future of the company, then proceeds to lay off some of the most productive people on that project, it’s a bit unnerving.

Where the current economic conditions come into play is that I know it would be very difficult to find a new job should I happen to fit whatever criteria management is using to determine layoff targets.

How I’ve changed.

I was lucky to receive my financial wake up call some years back, and have since ditched credit card debt and excess spending. Still, I have decided that 8-12 may be the new 3-6 and beefed up my emergency savings in a high yield account.

I’ve also upped the contribution rate on my 401k because I believe that eventually, the economy will recover. I still have 25-30 years before I need that money, and that’s a lot of time to recover. Besides, the stock market hasn’t been this cheap in a long time.

How about you? How have you changed the way you manage or look at money?

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Comments

2 Responses to “Has the Recession Changed You?”

  1. FFB
    May 13th, 2009 @ 6:21 pm

    We’ve been careful with our savings from before the recession so that part hasn’t changed for us. We’re in the process of selling our home and buying a new one. That’s certainly been affected by the economy! On the one hand houses are cheaper and mortgage rates are low which is great for us. Unfortunately the economy makes it tough for someone else to buy our home.

    I like that you are beefing up your 401(k). In a few years you might just see it blossom!

  2. Joe
    May 15th, 2009 @ 9:40 am

    @FFB,

    You’re in the same boat my wife and I were in last summer… buyer’s markets are great, but not when you’re a seller!

    That dichotomy is something that is rarely addressed in real estate… people either assume they are a seller or a buyer, when in reality they could be both.

    The 401(k) contributions are actually kind of funny.. last fall, I cut back on my contributions to increase our savings. Then in February, my company halted 401(k) matches, so I bumped my contributions back up again to compensate. I just couldn’t let the deals pass by - I am positive that the stock market will bounce back before I retire…

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