Halls a little less decked?

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OK. So we're officially in a recession. As far as I can tell, this is news to exactly nobody. I personally am very lucky to have been very insulated so far--my focus on frugality of late is based on my own stupid debt, not on any reduction in my salary or job-related hardship (though, of course, higher prices do change things a bit for me, just like anyone). However, even I am aware of an increase in hardship around me.

However, I saw something today that really drove it home. According to a survey done by the American Research Group, the average American family plans to spend $431 on gifts this Christmas. That's a 50% reduction from last year, when the average was $859. And even last year's average was a reduction from the years before that, as every year from 1998-2006 averaged over $900 and as much as $1,052 in 2001.

What does this mean, besides fewer gifts and disappointed retailers? What it implies to me is folks either not having or not being willing to use consumer credit. Most of those middle class big spenders in years past had to have been putting some of that grand they spent in December on plastic, right? I mean, it's not like saving for Christmas gifts is the American way. So why not just do that again this year? Could it be that people are still paying interest on the $859 from last year? It's hard for me to believe that we've really collectively seen the error of our ways, so there has to be a more basic reason.

Since I've started using mint.com (and a huge thank you to whomever recommended it to me in the comments here--I love it), one thing I've been really interested in is the feature that compares Mark's and my spending to the "average" American family's spending. Surprisingly, in most categories, we're below average. Our mortgage, car payment, fuel, utilities, and entertainment spending are all well below average. Our food spending is slightly higher than average, but not substantially. The only place where we spend substantially more than the average family is, unsurprisingly, pets.

Our collective income is not substantially below average. And we feel like we're barely able to keep up with our bills. So how are all of those people who spend more than we do and make less doing it? And with added child care costs we don't have? The answer has to be credit, right?

So where does it end? How much is this trend towards frugality (and even new "hipness" of frugality) really making a difference? Are those who are making inroads towards spending within their means still a fringe group? I think it's too early to tell, but knowing that people are planning on a 50% reduction in their Christmas spending certainly implies that's the case.

4 Comments

Wanted to say Congratulations on making it through November with a post every day. I have been reading them daily and I'm so glad that you're going to continue with regular writing.

Also wanted to chime in and say that our Christmas spending has drastically dropped this year as well. If we wouldn't have moved then I imagine we would not have had pay decreases this year, however, we relocated and are making approximately 25% of what we were previously making. Yikes.

Take care,
El

Both sides of our family has asked that we not exchange gifts this year, because of the economy. At first I was a little bum because like you the economy hasn't really hit us too hard(knock on wood). But the more I thought about it the more I love it. So instead of giving gifts to our families we're taking that money and using it to buy for those who have nothing or aren't getting by very well.

I keep telling myself there are tough economic times upon us. I certainly make less, in terms of the crap exchange rate and sending money home. However, my lifestyle hasn't changed for financial reasons at all, and it won't change any of my Christmas purchases. Granted, aside from when I lived in Scotland and everything coverted into a small fortune in dollars, I have never been the type of person to spend $800 on gifts. I won't be cutting back because I was never that wild to begin with.

Thanks for this great thoughtful post. I get very upset when I hear news reports saying it's bad for the economy when people are spending less money and using less credit. That makes little sense to me because I too deduced that lots of people were buying things with borrowed money and I don't understand how endlessly increasing people's debt loads would help the economy. People aren't making enough money to buy the things they're supposed to buy.

Overall we're doing ok. I took a big pay cut to get into a more long term job this year. It sucks, but my SO has had a pay raise and overall it really just means we're saving less and I'm buying less crap. We're doing a mini-Christmas this year with secret santa 40$ limit because we're all going on a family trip to Mexico in January. That'll mean lots of cutting back on spending for me because I'll have to take leave without pay for the vacation. We're all happy about the reduction in gifts too because we felt it was getting decadent.

Back to the economy, I'm still sad that house prices are so ridiculously high here. We have a good combined income but we can't afford to buy a very basic very small house in our town. A house similar to the middle class house I grew up in would require at least 10x our income. I wish house prices would drop more here!

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