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“Darn this recession!” exclaimed my stepson Jacob, as he grudgingly returned a butter-soft grey leather jacket with white piping to its rack in a nearly empty boutique in Manhattan’s Union Square. We laughed, especially when I reminded him that even in boom times a luscious lambskin jacket was not in his college budget. ‘
Later that afternoon, I watched a fashionable woman hold up a chic jeweled necklace in a swanky New York 5th Avenue department store. She tried it on and fingered
it admiringly, sighing to her shopping companion, “I love it, but do I really need it?” Despite her designer handbag and other exclusive accoutrements, she handed the piece back to the woman behind the counter, saying, “It’s just a bit much for the times.”
It seems that everywhere one turns, even in affluent circles, budgets are the new black. Cheap is the rage. Understated is in style. Whether they can afford more or not, wealthy women and men are boasting about scoring bargains at 70 percent-off sales. I have even heard ultra high net worth individuals brag openly about frequenting stores in which they would not have been caught dead eighteen months ago. It seems that frugal can even be fun.
Splurging is Out; Responsibility is In
Individuals at all levels of wealth are rethinking their spending in today’s challenging economic environment. Some are changing their habits for budgetary reasons, and some are trying to maintain restraint for the sake of social propriety. It just does not look right to flaunt expensive purchases or rattle on about international luxury vacations when friends and acquaintances all around are enduring layoffs, facing decimated stock holdings, and confronting vanishing home equity. Even in swanky social circles, one does not know how the neighbors’ net worth has been impacted, and it seems uncouth to splurge at levels previously considered acceptable – at least not in public.
And, perhaps some Americans are reevaluating whether the ostentation that defined much of the last decade really bought them lasting happiness. A sense of responsibility seems to be in style these days.
Shying Away from Ostentation
While fake baubles, accessories with rococo touches, and gaudy buckles adorn much of this year’s clothing styles, many other consumer items are scaled back and more ecologically friendly. Many new cars are simpler and more fuel-efficient and across the country, fancy restaurant prix fixes have declined.
Even shopping bags are experiencing a makeover. Numerous news stories report that upscale designer establishments are ordering less flamboyant versions of their shopping bags so that wealthy consumers do not draw excessive attention to designer purchases. Subdued colors, smaller logos, and even brown paper bags are now de rigueur among posh boutiques nationwide.
Even on Valentine’s Day, purchases were down in 2009 among the affluent as compared to prior years. A February 2009 MSNBC.com article cited a National Retail Federation study which found that Valentine’s Day spending had dropped by 25% even among households with incomes over $150,000 a year. The same article quoted Jewelers of America president John Green, who stated that ultra wealthy buyers who routinely purchased pricey yellow diamonds in the past were now opting for less expensive and less showy white diamonds.
The National Retail Federation study provided anecdotal evidence that Americans with investment portfolios worth more than $10 million are shying away from pretentious purchases and presents. While flashy gifts have been status quo for most of the 2000s, they are now considered vulgar and out of tune with today’s economic climate by people at all income levels.
Americans are simply paring back across the board regardless of net worth. A February 2009 Philadelphia Magazine article asked citizens of that city how they were changing their habits. While former mayor John Street said, “I live a relatively spartan lifestyle already,” most of the other respondents said that they were cutting back on luxury purchases, taking less extravagant vacations, and adjusting appointments for spa or beauty services such as manicures and pedicures from weekly to monthly or eliminating them altogether.
Saving is Trendy
As far back as April of 2008, even before Wall Street melted down and we were officially in a recession, CBS Evening News anchor Katie Couric reported that it was becoming trendier to save than to spend. American’s newfound sense of pride in discount shopping and socking cash away in savings accounts has replaced record levels of excessive credit card debt and an apparent inability to stay within a budget.
In February 2009, The Commerce Department released the U.S. Personal Income and Outlays report for the prior December. According to the report, the personal savings rate in America hit 3.6% in December 2008, a seven-year high. In the 1970s and 1980s, the savings rate was in excess of 10 percent of disposable income, but personal savings has been steadily declining for the last thirty to forty years.
Even the 10 percent savings rate of the last century falls short of the number many financial advisors recommend to clients of all income and net worth levels. Numerous financial advisors suggest that saving a minimum of 10% of household income is necessary in order for individuals to maintain their lifestyle in retirement. While for the ultrawealthy, income in retirement may not be as pressing an issue, liquidity is. Many affluent Americans are reconsidering the amount of cash they need on hand for short-term needs. Few individuals foresaw the possibility of a stock market decline of the magnitude we have witnessed, and are now realizing that a larger allocation to cash or to investments that are more conservative is prudent. If budgeting is the new black, cash is also in fashion.
The “New Frugality”
While we are bombarded with media messages that spending is the only way to stimulate the economy, most Americans are showing restraint. In addition to taking a “wait and see” attitude about the economy in general, many individuals are rethinking the amount of savings they should maintain at all times. A healthy trend towards saving coupled with responsible consumption is a more realistic and sustainable track for economic health than we have been on.
In keeping with this new focus on responsibility and savings, the April 15, 2009 cover story of Time Magazine was entitled “The New Frugality.” In the article, author Nancy Gibbs asserts that the recession has changed much more than the way Americans spend – it has changed our values, or at least provoked us to reevaluate them.
“No one wishes for hardship,” writes Gibbs, adding, “But as we pick through the economic rubble, we may find that our riches have buried our treasures.”
Green Goes Hand in Hand with the New Mood
Not surprisingly, as Americans take a tough look what they need and want, a do-it-yourself frame of mind has crept back into our collective consciousness. Gibbs notes in the April Time article, “Common sense is back in style, meaning we’re less willing to buy what we can have for free.” She reports that during the first three months of 2009, “Sales of canning and freezing supplies rose 15%” and bottled water sales have dropped 10%” compared with the same period last year.
Americans – including our new president and his family – are planting gardens, visiting the library, and spending time cooking at home. This new back-to-basics mentality has motivated many to rethink their true goals and priorities.
So next time you’re eyeing that fabulous leather jacket or tempting trinket, you may find yourself taking a step back. Regardless of your ability to purchase that item, you may join many Americans in deciding to say no to spending and yes to saving and sustainability. While a life fueled by indulgence can be enjoyable and amusing, many are finding that living a life of responsibility and sustainability is equally, if not more fulfilling. Being in style has never been so rewarding.
