My Personal Finance Blog

Hazzard over at Everybody Loves Your Money wrote and article on how keeping up with the Jones’ happens in many ways. He makes a couple good points, inspired me to write this post…

I think people’s labeling extreme savers as cheapskates is partially in response to their own feelings of guilt (whether they realize them as such or not) over not having made wise choices with their money. If we are able to pull someone into the same place we are it validates our (possibly bad) decisions.

As for advertising… I work in the industry… It can and does have a tremendous impact on what people think, what they desire and most importantly what they buy. You probably don’t even realize how many ads you see in a day and those of us in the business are constantly struggling to find newer and better ways to reach you. Working in the business gives me a healthy perspective on the ads I see, they have far less effect on my purchasing habits than they used to. For instance, I only buy brand names now when I’ve determined for myself that they are superior to the generic versions. (See Jonathan’s post about this at MyMoneyBlog.)

That being said, advertisers are not evil, they are simply trying to make the businesses they represent as successful as possible. It is not an easy job, especially when the product you are trying to sell is no better, and sometimes inferior to its competitors. Personally, I have an underlying conflict in that I don’t believe in the product I’m selling, would likely never consider buying it myself and feel that the work I do is not providing much value to society… I also see the other side however. A good deal of our economy’s growth has come from consumer spending, and while on an individual level it is not a good thing to live on credit, for the health of the economy as a whole it has become a necessity. Watch what happens when the pendulum swings the other way, as I believe it is starting to. Large numbers of people will be out of work, which in some way or another will impact all of us.

Look at Detroit for instance, thousands of people losing jobs which leads to local businesses suffering (think of the loss of business to restaurants alone in areas near companies that have layed off sizable numbers of people.) It has also caused housing prices to begin to slide which impacts a huge percentage of people in the area. (Now you know why I don’t carry my house at its full value when considering my net worth.) These layoffs would be affecting me personally regardless of the fact that my wife lost her job. The lessons learned by those who lived through the last depression are all but lost now. (note: I’m not predicting a depression here, the economy today is structured quite differently than what it was back in the 1930s)

If (really when) the larger economy slides into recession it will also affect us savers directly. The stock market has done well since the dot com bubble finished bursting. We’re due for a correction, a big one in my opinion, which will come just as the retiring Baby Boomers are needing their investments the most. Those of us who actually save money are going to be even more affected than the average person by this because ironically, we are the ones holding the investments which will lose a significant amount of their value. We have something to lose.

There is good news however, since we live below our means already, it will be less of an adjustment for us if we need to cut our consumption further. We’re also all less likely to lose our homes and other hard assets because we have cash available to continue to pay the bills. In fact, some of us may be able to profit immensely by buying the assets of others at dirt cheap prices. We’ll need it, to support our parents.