Tightening of the Financial Belt

Anonymous Reader sent me a link to an interesting article from the New York Times. It’s about people who have decided to take a look at their finances in light of the “dreary economic outlook.”

Take Betsy Illium from New York City for example:

She was appalled when she calculated that Dobbinsâ€™s [her dog's] grooming along with her own weekly hair, nail and massage appointments; gourmet groceries; restaurant meals and Starbucks coffee cost nearly $2,000 a month.

Via New York Times]

To bring those costs down, she’s switched to a cheaper groomer and salon and has cut back on the gourmet restaurants. For clarification, Ms. Illium in not in a dire financial situation. She has disposable income to spend.

The interesting thing here is that many people with that extra income are choosing to pinch more pennies. Why? Because it gives them a sense of control.

Sure, being thrifty can help people save a few thousand dollars a year, but it can also help them regain some sense of control when the world seems topsy-turvy â€” with stock markets around the world falling last week, brokerage firms announcing billion-dollar losses and those ubiquitous For Sale signs.

[Via New York Times]

I can relate to wanting to feel in control. I know when other areas of my life seem a bit unpredictable, I love to be able to stick my nose in our finances and pay more towards our debt or contribute more towards our savings. When everything else seems out of control, I can still take control of our finances.

The rest of the article discusses some of the psychology behind spending and how it is tied with your vision of self-worth. Pretty interesting.

Or as Rachel LeMaster, 29, a grade-school music teacher who lives in Washington Heights, put it: â€œA lot of what you spend goes toward showing other people what you have.â€

Via New York Times]

Rachel – I’d have to agree. We have had spending in our past that was more of a “look what I have” type thing. Thankfully, we are doing much better with that now.

Thanks Anonymous Writer for the article!

Posted by Tricia on February 3, 2008 at 10:13 AM in General Personal Finance | 6 Comments »
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Early Retirement Extreme responded:
Posted: February 3rd, 2008 at 2:04 pm
â€œA lot of what you spend goes toward showing other people what you have.â€ … LOL, I’m thinking getting their net worth tattooed on their foreheads might be a cheaper solution?
Mrs. Micah responded:
Posted: February 3rd, 2008 at 3:13 pm
Like ERE, I think that’s a great phrase. And so true…we make a lot of assumptions about people based on how they live.

Frugality, budgeting, all that is good for control whether you’re in debt, out of debt, or even rich.
Rob Madrid responded:
Posted: February 3rd, 2008 at 4:17 pm
Interesting, it’s also a good part of the reason why tis recession is going to be alot deeper than the last one.
Sherri responded:
Posted: February 3rd, 2008 at 4:34 pm
When I look at my spending on non-essentials, I find for me personally it isn’t about “look what I have.” Most recently I spent $80 on a large quantity of hand-made all natural soaps, shampoos, and lotions. If I had bought the same amount of those products at a drug store it would have been about $30-40. However, like Emmi, above I find value in spending more for something that is greener (non toxic chemicals in these products) and made by someone paid a fair wage.

So four years ago would I have spent twice as much on these products? Nope. I didn’t have room in the budget. (Not that I have a hell of a lot of disposable income, but more than I did then.) But now I’m glad that when I do feel I have an extra $50-100 to spend, I often spend it upgrading a product I need to a greener, fairer, one that makes me feel happier and healthier.

Oh, and to be completely honest, I do also spend money on restaurant food when I am feeling down or too tired to cook. No one’s perfect! =D But I’m a vegetarian so usually the restaurants I pick are healthy!
Matt responded:
Posted: February 4th, 2008 at 10:12 am
Being able to remain in control when the world is all topsy-turvy is definitely an asset and if that means tightening your belt spending wise makes perfect sense. Personally I’m not too worried about the economy but that doesn’t mean I’m going to ignore it; my way of attaining some control is to reduce a bit of spending and set aside a bit more in my emergency fund.
EmilyStarbuck responded:
Posted: February 6th, 2008 at 12:22 pm
I agree with all of that – being frugal and cutting back really does enable you with a sense of control over your finances. Plus, when you are able to see a number for how much you saved, it’s very satisfying. I am in the process of trying to cut back on dining out and shopping, and being able to put more into savings is so much more gratifying than splurging at Target, only to come home and wonder why the heck I bought so many things I didn’t need!