Has the financial crisis changed how you use and perceive money?

We’ve seen this movie before, and it’s not a happy one. Japan’s financial sector imploded in the 1990s as bubbles in real estate and stock prices (sound familiar?) burst. Eventually, Japan’s central bank drove interest rates to near zero to stimulate the economy. But it was, as the economists say, “pushing on a string.” Banks were reluctant to lend because they needed to hoard capital to repair their balance sheets — just as they need to do now in the U.S. Economic growth slowed, and demand for the credit that was available diminished. The result was Japan’s infamous Lost Decade: 10 years of low or no growth. 

I have always had an interesting relationship with money. I always thought that it was important to save. This was basically because of how my family used money. No one had a lot of debt and just because you were offered a lot of credit whether for a loan or credit limit on a credit card, if you couldn’t pay for it… then you didn’t buy it. Paying for an item didn’t mean you paid right then but would making the payment on a new item force you into hardship and dissuade you from doing things that you liked or wanted to do? If so, then you really couldn’t afford it.

Since people are moving to cash because they can’t afford to use credit like they used to, then it is difficult to justify spurious purchases. Even though gas has dropped, getting a loan from any source is difficult. Debt was a way of life for many Americans and now that lifestyle has taken a hit the economy is in turmoil.

Like many other people, I have spent less and have looked for great deals and try to avoid looking at my 401(k) and mutual fund statements. My online bank has decreased the interest rate three times in the past year. My mortgage is locked in at a fixed rate and I went with a 20-year mortgage instead of a 15-year even though I’m paying off extra so I will pay it off in about 15 years. Just in case I wanted to jet off to Italy, or needed extra money for something, I would have some extra leeway in my budget. 

Many people are probably in the same boat, spending less unless they have to and hoping there is no drastic increase in any area that would throw their budget into chaos. Just in case, the wallet stays closed and opening it has to be absolutely necessary. Fewer trips to restaurants, fewer purchases at the mall and going out only when necessary have changed the financial landscape of our nation.