Americans’ spending habits are changing out of necessity. When you don’t have as much money to spend any more then you make changes. Time has a series called “How Americans Spend Now.” There is a mixture of people represented those whose jobs have been affected by the economic downturn and some who are doing ok. The changes that people are making are because of money a doggie day care center sees fewer clients, a couple has cut out most of their entertainment because of unemployment and people who rely on tips talk about the decrease in gratuities.

Americans are spending differently because there is less to spend. If you have money and want to buy something then you should do that, as long as you are taking care of your needs and not going into debt.

Living well on less. It can be done. I don’t think you actually have to be a cheapskate to do it though.  Jeff Yeager, The ultimate cheapskate has tips for living on less that will save you $20,000 a year. Sounds great but some things you may not want to give up. A cell phone, dining out and sending your kid to college are things Yeager says people should give up.

And they are — let me say in advance — these are some fairly radical changes.
But, again, it’s probably not about sacrifice.
It’s about changing your life and maybe in the end being happier.

Does everyone want to make these radical changes? While it may be necessary to make some radical changes as Yeager advises, going cold turkey may not be the way. Slowly but surely or prioritizing what you really need or want in your life works just as well.

Sure you can save money by not eating out and always cooking at home, but going on for a special occasion is always fun and make the occasion really special. A cell phone is a necessity for many people for work, so cutting that out may not work for everyone. Dining out once a month at a nice place for book club is a social event and I have a great time, I don’t want to cut that from my budget but I have been cooking at home more often, which does save me a lot of money.

Priorities differ depending on your marital and familial status. Do what is right for you – when I make a decision to go to dinner and my other bills (including savings) are paid, then I can splurge a bit. I would make different choices if I had people depending on my salary.

“What I am saying is that we have moved from an era of conspicuous consumption to an era of considered consumption. People at one time wanted to showcase all of the things they are buying and now they are stopping and really thinking about it.”

Kit Yarrow – consumer psychologist and professor at Golden Gate University in San Francisco, California

It is not a crime to like nice things. Even the most frugal of us like nice things, who doesn’t? Mortgaging your future for those nice things is what is the problem.

There is a lot of backlash in articles and stories about the recession; bringing about a collective shunning of luxury goods and services.  Every luxury is not bad. Living above your means and going into debt to finance your fun trashes your budget. There are still people though who have some disposable income. 

Disposable income doesn’t mean that you have money to throw away but that you have some extra money to spend, that doesn’t have to go toward bills or saving or investment. Saving all of your extra money for too long a period can make you bitter, if you have no goal in mind. This does not mean you have to buy things just because others have them or because the money is burning a hole in your pocket.

Saving is great, but conscious and thoughtful consumption makes a purchase special. Rather than buying something just because it is on sale, or just because it is trendy. Thoughtful purchases makes people the true cost of the item. You may have an extra $00 or have saved money by cutting out some services. Yet, if you cannot do certain things yourself – like cut your hair, then that is a service that you can’t live without. This doesn’t mean that you have to have the most expensive hair stylist coif your hair but you can still have someone do it for you, for less, or less frequently.

Thinking about purchases before you make them, regardless of the price reaffirms your commitment to spending money wisely. I enjoy looking at things and have been lured in by the clearance sections at stores too often. Occasionally I find a bargain, other times I just got sucked in by the lure of something cheap. Now, I will buy something that is only needed or really a great deal. 

Frugality rocks but that doesn’t mean that you can’t enjoy some goodies along the way. Some people are frugal by choice or force. Those who are frugal by choice may change how the truly wealthy spend their money. Those who are forced into frugality can share what they have learned with others and are making significant money choices as well.

This  woman has done a great thing for her wallet. She has saved over $300 a month by making some changes that were not huge but they added up to something greater.

It isn’t always easy to chop things out of your budget, but none of the changes that this lady made seemed as though she was going to have to start eating noodles or cheap food in order to save money. She made cuts in some areas and kept other things  to make up for the slack. She got rid of her home phone but kept her internet as a means of communication  (plus Skype).

Kudos!

If other people made cuts like she did, this could affect their wallets. I know a lot of people who will not cut their cable, because it may be the  ”only free entertainment” that they had. Not everyone needs what they have been spending on. She didn’t cut out everything just the things that she could live without. Thinking about what you spend your money on is imperative.

There are naysayers who say that people who are saving more and buying less are contributing to the poor economy. Though people spending less does have an effect, were we, as a nation, spending money we really had or were we robbing ourselves?

If you’ve got a decent income, changing your brand of coffee or being the last person in your zip code to buy an iPod just isn’t going to get you very far. To make a real difference, you are going to have to cross out a major line item. The private school. The house with the great address. A parent staying at home with the kids. Or the plan to retire early. These are not frivolous, spendthrift things. Responsible grown-ups can choose among them. It’s just that most of us can’t choose every single one of them. 

The columnist makes a good point about making choices. Although certain incomes cannot afford private schools. Though the salary may be covered, there are also other extras, such as fund raising events, and other expectations from the school. Buying a home in an area you cannot afford is what happened to many people. Though a person might be able to pay the mortgage; it’s the extras that make a difference. In the case of a home, taxes, maintenance, and utilities add up to large extras. Other choices, require big changes and additional strains on your wallet that you may or may not be able to make. 

If people are truly living within their means and make changes to their daily living they can do things. A parent staying home with the kids if both parents are making minimum wage is very difficult. Early retirement, without a sizeable nest egg is not easy to do.

The private school. The house with the great address. A parent staying at home with the kids. Or the plan to retire early. 

All of these items seem like luxuries, because having a house with a great address does not mean that there is a less expensive house, in a safe neighborhood with an address that is less chic. Private school is more costly than public school because of tuition and even with public school there are fees to be paid, fundraisers, field trips and other expenses. If some of the people were responsible and honest with themselves about money and what they couldn’t afford, then they might not have to make those decisions after they have become entrenched in a certain lifestyle.

Making reasonable choices that do not affect the quality of life for people is a personal decision. Taking a child out of a private school to make new friends, depending on the age of the child can be traumatic. Changing schools can be stressful depending on the child. 

Balancing your budget realistically means that when you buy a home, utilities increase, taxes increase even if you have a fixed mortgage, tuition increases just as cost of living if you decide to retire early.

I disagree with the author, little changes really will make a difference. Yet, sometimes you have to make the hard decisions up front.