Tuesday, April 29, 2008

Penny Wise, Pound Foolish

I have to admit that I found this New York Times article from the other day quite fascinating. Excerpt:

Spending data and interviews around the country show that middle- and working-class consumers are starting to switch from name brands to cheaper alternatives, to eat in instead of dining out and to fly at unusual hours to shave dollars off airfares.

Though seemingly small, the daily trade-offs they are making — more pasta and less red meat, more video rentals and fewer movie tickets — amount to an important shift in consumer behavior.

In Ohio, Holly Levitsky is replacing the Lucky Charms cereal in her kitchen with Millville Marshmallows and Stars, a less expensive store brand. In New Hampshire, George Goulet is no longer booking hotel rooms at the Hilton, favoring the lower-cost Hampton Inn. And in Michigan, Jennifer Olden is buying Gain laundry detergent instead of the full-price Tide.

The article goes on to talk about other things consumers are doing, from giving up on first-class accomodations to making coffee at home instead of making a daily trip to Starbucks or some other coffee emporium. One way or another, people are getting the message: it's time to wise up, shop less, spend less, and do without.Or are they? Another quote from the article reveals an interesting blind spot many consumers seem to have:

By no means has the economic downturn been bad for all product categories. For instance, sales of big-ticket electronics, like $1,000 flat-panel televisions and $300 video game systems, are on the rise, according to retailers and research firms.

Falling prices for such devices and a looming government deadline to convert to digital television have helped. So has the view, sensible or not, that the technology is a good investment. At a Best Buy in Southfield, Mich., James Szekely, 28, a mechanical engineer, was shopping for a big high-definition TV that he expected would cost at least $2,000, an expense he rationalized because “at least we can watch movies at home.”

(In a survey conducted this month by the NPD Group, a research firm, consumers suggested that they would sooner cut spending on clothing, furniture and eating out than on video games.)

So what started out as an article on belt-tightening and consumer thrift ends up revealing the sad truth about the American consumer: by and large, we no longer know how to be thrifty.

Saving a few pennies by buying off-brand detergents or cereal isn't a bad start, of course--though many of us countercultural single-income homeschooling moms have been doing that sort of thing for some time now. Giving up pricey coffees we rarely buy or fancy hotels we never stay at anyway isn't going to affect our bottom lines at all; and few of us are in the market for a $2,000 television in the first place.

The truth of the matter is that many Americans, myself included, have only the most limited and basic understanding of the habits of thrift or economy. Our Depression-era grandparents knew what it meant to live according to these rules, but for so many generations we've had the easy availability of cheap consumer goods as our standard, so that the people quoted in the article can take a few small measures to reduce their spending by mere pennies without ever looking at the big picture.

And the big picture is that in America today, most of us rely on the ability to purchase everything from our daily necessities to things other generations would see as unheard-of luxuries, just by sallying forth to the nearest store and swiping a bit of plastic through a machine that knows better than we do how much we're spending.

Only a relative handful of people grow or raise any of their own food, make their own clothing or household goods, do their own car repairs (which modern cars make extremely difficult anyway given the number of computerized components), perform any but the most basic maintenance on their homes, or live in such a way as to achieve, or even strive for, some level of self-sufficiency. On the contrary, shopping is a national pastime, people expect to replace things up to and including cars and furniture on an every-few-years to every year basis, and the thought of having to postpone a major home improvement project or the purchase of a big-ticket electronics item is enough to make some believe that they're teetering on the brink of outright penury.

I know I'm guilty of this kind of thinking. I like to shop, and like most women I have my areas of particular weakness. But now I'm starting to consider how much of my impulsive spending has to do with a sense of pride, a false keeping-up-with-the-Jonses that makes me think that my clothes are worn out when they're not, or that a new pair of shoes is something I need instead of something I just want. What clothes and shoes are for me, kitchen gadgets are for another, or home decor items are for someone else, or craft supplies are for still another. It's not that having any of these items is a bad thing; but how often do we shop and spend thoughtlessly, carelessly, with no regard for a reasonable budget and a sensible approach to the less-than-necessary items we occasionally purchase?

If the recession many believe is coming, including those people quoted in the Times article, actually does come, we're going to have to challenge ourselves to look at many of the things in our lives that we currently take for granted. Shaving a few pennies here and there off of our monthly spending won't necessarily be enough to help us get by in a time of rising costs and stagnant incomes. We may have to discover some of the truths of those aphorisms of the past, that a penny saved is a penny earned, that a fool and his money are soon parted, and that there's no point at all in being penny wise, but pound foolish.

1 comment:

Matilda said...

I once heard a woman quoted in a documentary about The Great Depression as saying that she didn't know there was a depression going on... suddenly, everyone else was just living like her family always had. So many people are complaining about the cost of food and fuel going up, but I haven't heard anyone yet mention what they might have to give up in order to afford it (vacations, electronics, luxuries). For those of us already giving up those things others consider necessities (cable/satellite TV, work wardrobes and trips to the salon) will life really be all that different? I guess it depends on how bad it really gets.

Excellent post!