Every season it seems like someone is declaring some new color to be the “new black”. When it comes to personal finance, it seems this year black is the new black.
“In the black” is a corporate term that indicates a company is profitable. In other words, they’re spending less than they make and are actually saving money.
It’s a great concept – and one that apparently the every day consumer is starting to utilize as well.
Where we’ve been
Somewhere around 2004, the US Personal Savings rate fell below zero! For the last several years Americans spent money like it grew on trees, but now more and more people are committed to saving and eliminating debt.
They’re getting back into the black.
What happened
The 2008-09 recession (one of the worst in history) forced many people to re-evaluate their personal finace situation. Many people have lost jobs or got salaries cut, which has forced them to reduce spending.
For what it’s worth, this recession has been a very good thing in the sense that is has shaken people up to a point where they are getting back on track with spending less and saving more!
Where we are now
This year marked the first time in 5 years that the savings rate has increased to a positive level! This is great news from a personal finance standpoint!
In fact, economists predict our savings rate will increase to approximately three to five percent and some see it going as high as six to 10 percent!
The question is will it last?
Will it continue
I don’t know about you, maybe it’s just the critical person inside of me saying that I’m not so sure this will last.
Think about it – most folks have been so used to living beyond their means, buying everything in sight and living for today that once this initial pin-prick of a recession is over I imagine those same people wanting to resume that “fun” lifestyle they had before!
How about you?
Have you increased your savings rate? If not, are you at least cutting back on spending and trying to knock out some debt so you can increase your savings then?
If this recession hasn’t at least taught us to build up an emergency fund and get prepared for the unexpected then I don’t know what will.
Do you think this increase in savings rates will continue?
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{ 6 comments… read them below or add one }
I think many will go back to their bad habits. I hate it but it’s human nature to spend, spend, spend. Our government is not being a good role model that’s for sure.
.-= Ken´s last blog ..Spending Tips for Amusement Park Vacations =-.
I fully agree with Ken here, people will go back to their old habits. Spending is easy, it’s encouraged by the sytem, and it keeps us in sync with the culture.
Savings is harder, and in order to do it, we have to be comfortable being out of step with the majority. But that’s only the feeling at the beginning. Once you have a pile of savings, and are comfortably living within your means, it all feels better. It’s making the intial adjustment that is the problem for most.
This recession has forced many to do that, but the media are relentless and will probably drive most to go back to their old ways. We tend to forget the lessons of hard times when better ones come along. Just human nature I suppose.
.-= Kevin@OutOfYourRut´s last blog ..Seek Fulfillment Beyond Your Work =-.
I think previous downturns tell it all–most people will definitely go back to their old ways.
Some of the ways to make sure you’re not part of that average is to take steps now to automate your finances, record your thoughts and feelings and figure out how you’re spending money in these tough times.
When things get better, you have to keep reminding yourself that the next recession is only around the corner (as bad as that sounds) because the better-prepared for it you are, the less painful it is to go through it again.
.-= Wojciech Kulicki´s last blog ..How to Write a Great Financial Mission Statement =-.
Thanks for the comments guys. You are probably right – at least the majority of people will go back to those old ways. It seems like there has been a little minority of people who took this recession to heart and really changed their patterns of spending/saving. But you’re right it’s hard when everything around you screams “Spend!”.
Thanks Wojciech, Perhaps this recession will help reinforce the notion that you need good cash flow, good cash reserves and low debt. Folks who had that weren’t as negatively affected.
I have to agree. I think most people will go back to their old ways. Maybe I’m just being naive to hope that as the availability of information changes people can actually become smarter. Through great reading(blogs) like this on the internet people might actually learn the errors of their ways. I guess if even only a very few learn and change then at least it’s a step in the right direction.
.-= Evolution Of Wealth´s last blog ..Sundy Link Rodeo 11 =-.