Americans Trying to Save Money

November 17, 2008
americans-saving-jeweler.jpgSpendthrift (spend’ thrift’) n. a person who spends money carelessly; squanderer. Frugal (froo’ gel) adj. not wasteful; not spending freely; thrifty.As economic news has worsened and recession
appears inevitable, Americans’ spending habits have swung from one
definition to another.

Spendthrift to frugal, in record time.

After years of free-spending and saying “charge
it” at every turn, Americans are using words such as “scrimp and save”
and “scrape up some cash.” Now, they’re cutting back on almost all
fronts, regardless of how much they earn. According to a recent USA
TODAY/ Gallup Poll, 55% say they’ve cut household spending as a result
of lower prices in the stock market and fears about the economy. Just
slightly more say they’ll spend less on Christmas gifts this year than

They’re cutting back on travel for the holidays
(63%), eating out at restaurants (81%), entertainment such as going to
movies (72%), and household services such as housekeeping or lawn
service (37%).

But the easy savings are over, and Americans are
digging deeper. They’re selling old gold jewelry and ransacking closets
to find “stuff” to put up for sale on eBay. More are using grocery
coupons and buying holiday gifts on layaway.

“We’re hoarding every penny and trying to pay off some credit card debt,” says Nichole Black of St. Louis.

She sold a “kinked-up” gold necklace she hadn’t
worn in 20 years and put the money in her savings account. Her husband
found a carpooler on Craigslist to share gas costs, and they didn’t buy
any new school clothes for their daughter this year. “I’m just trying
to hedge against any bad times,” Black says.

Even the relatively wealthy are trimming
unnecessary spending, says Wendy Liebmann, president of WSL Strategic
Retail in New York. Her company just surveyed 1,500 adults and found
that high-income consumers are being stingier as they’ve watched the
value of their stock investments plummet.

People with incomes over $100,000 a year are
cutting back on eating out at restaurants, picking up takeout, buying
home furnishings and even drinking specialty coffees, according to the
WSL survey.

That may not seem like much, in comparison to
those who can’t afford to buy gas to drive to work. But “emotionally
and financially, (the wealthy) are feeling quite shattered by this as
well,” says Liebmann. “Now, they’re in the soup with everyone else.”

The government says consumer spending fell off a
cliff starting last summer, with the largest drop since the early 1980s
hitting in September.

Retail sales in October were down 2.8% from a year earlier, a record drop.

But those statistics don’t show just how tight-fisted the U.S. consumer is becoming. Here’s what some people are doing:

Selling extra stuff

Americans typically have about $3,200 worth of goods at home they could sell to raise cash, says eBay CEO John Donahoe.

Until last month, Jessica Sanner only bought items on eBay. But the sagging economy has forced her to improvise.

“I looked around my apartment, took some
pictures of some things and listed them” on the online auction site,
says Sanner, 20, a college student in Bristol, Conn. She says she
couldn’t make ends meet on a part-time job that pays less than $300 a
week. To her surprise, her perfume sold for about $25. Within days, she
sold five more items.

“I get rid of unused items and supplement my paycheck,” she says. “It’s so easy.”

John Donahoe, eBay’s CEO, estimates that
Americans have an average of $3,200 worth of stuff gathering dust in
their homes — stuff he thinks they’ll start selling on eBay.

Already, 1.3 million people make their primary
or secondary income from eBay, the company says, and Donahue expects
that to increase during the next few months. “People become more
entrepreneurial in tough economic times,” he says.

The sign outside Harts Jewelers in Weymouth, Mass., says “scrap gold.”

On a recent day, owner Gary Liebert had about 10
people show up to sell their jewelry to him. That’s more than he
normally sees in a month.

Liebert says he’s seen everything from young
people who say they need money to older people selling their diamond
rings and wedding bands to pay bills, to one man who said he needed the
money for heart medication.

“You do get people with sad stories,” he says.

Eating at home

Nearly two out of three restaurant operators reported declining sales in September, says the National Restaurant Association.

Cutting back on dining out is the No. 1 or No. 2
money-saving move for Americans, no matter their income, according to
WSL Strategic Retail. That’s led to new nesting around the kitchen
table for many Americans who have been hooked on dining out for a

Cyrus Tookes of Jacksonville says he and his
family of six children have “tightened the reins a bit” on food and
clothing expenses. They’re cooking more at home, and they’re buying in
bulk, too.

He and his wife, Monique, also started putting
smaller portions of food on each child’s plate after discovering that
“the trash can was eating better than we were!”

Trimming grocery costs

Coupon use is increasing after 15 years of decline, according to the Promotion Marketing Association’s Coupon Council.

Suzanne Forte of Atlanta is among those who are using coupons as a way to save money on groceries.

“For the first time, I have collected coupons
for grocery store items, transferred my prescription to a new pharmacy
to take advantage of a $25 check and cut costs in other ways,” says
Forte, who is expecting a baby.

“I have always been a little thrifty, but the current economy and expecting a new child has inspired me to cut back even more.”

Saving before buying

One in five people surveyed say they’re saving to buy something they want, instead of charging it, says WSL Strategic Retail.

Kmart isn’t the only retailer that’s dusting off
its “layaway plan” for the first time in decades. More retailers are
letting consumers pay in advance for items weekly or monthly until the
item is paid off.

Michael Bilello is vice president of the website
eLayaway, a Tallahassee start-up that handles layaway programs for
1,000 retailers.

Since last fall, the 3-year-old site has seen
its registration leap from 150 to 7,000. “The good old-fashioned
layaway plan is back,” says Liebmann of WSL.

“It’s the notion that, ‘I don’t want to give up on everything, so I’ll save for it.’ “

Taking an extra job — or two

The number of people who have a full-time and
a part-time job at the same time increased 11% to 1.92 million in
October from a year ago, according to the Bureau of Labor Statistics.

Sabrina Akins of Woodbridge, Va., has had to take out short-term “payday” loans to tide her over until her paychecks arrive.

It’s not that Akins, whose ex-husband is
disabled, isn’t working or earning money. In fact, she has three jobs:
a full-time day job as an administrative assistant for a government
contracting firm, a part-time night and weekend job as a security guard
at a department store, and another part-time job selling cosmetics for

Still, with costs including her rent rising
faster than her multiple incomes, Akins is considering moving to a
somewhat less expensive apartment that’s still close enough to family
so she has help with child care.

She’s also looking for a better paying full-time job but worries that in this economy it will take months to find one.

But she knows she has to look, because she doesn’t want to “kill myself working two jobs because I fell asleep at the wheel.”

Buying fewer luxuries

Of “luxury shoppers” with average incomes of
$210,700 a year who were surveyed, half said they are spending less on
luxury items now than a year ago, according to Unity Marketing.

Back when the economy was doing better, Suzanne Ferreri of Youngstown, Ohio, would put her extra income toward luxury items.

Why not? She’s single and could afford it.
Ferreri says she “used to always treat myself to one luxury item per
season, like a designer handbag. Now, that’s completely gone out the

Another luxury consumer agrees.

“When I open investment statements in the mail,
they have severely dwindled, and it’s a constant reminder of the
overall economy,” says Heidi Namin of Southbury, Conn.

So Namin has cut back on “extras,” such as
manicures, items for her home and things her kids don’t really need.
She’s already cut back on dining out in favor of dinner parties and
good food and wine for her family at home.

“With all costs of living rising, the only thing
that is not rising is our salaries,” says Namin, a financial
administrator at a law firm.

Renting more movies

Sales of new Blu-ray high-definition disks (a
newer DVD at home movie format) are more than triple that of a year
ago, according to Home Media Magazine.

Home entertainment traditionally has been
resilient to economic downturns, mainly because renting a movie for a
dollar or two — or even buying a new DVD for $15 — is a lot cheaper
than a night at the movies.

But the home entertainment business is shifting to the new Blu-ray high-definition format.

As a result, DVD sales fell in the third quarter
this year, although studio executives point to the Olympics as a
primary factor.

Pam Fox, 49, is a medical socialworker in
Carlsbad, Calif., with a husband and two sons. She says they are
cutting back on going to the movies, because it’s so expensive.

“Just last week, I went with my son, Trevor, to see Lakeview Terrace, and tickets alone were $22,” Fox says. “With popcorn and snacks, it’s $50 for just two people.”

One thing Fox and her family do more of: rent movies.

“Then we can have dinner and snacks at home,” she says.

Staying close to home

Americans are expected to take 2 billion
individual trips in the United States in 2008, down about 1% from a
year ago, according to Global Insight. That includes all trips, from a
car ride of more than 50 miles to an airplane flight across country for
a vacation.

People are traveling less for leisure because of
a combination of economic uncertainty, rising airfares and hotel costs,
tighter credit and declining housing wealth, says Kenneth McGill,
executive managing director of Travel & Tourism Services at
economic research firm Global Insight.

“They have finally begun to postpone, or reduce outright, their travel plans,” he says.

Last year, small-business owner Marcia Riley of
Sarasota, Fla., went on five cruises with her husband and three
children, ages 10, 11 and 13, but they no longer can afford to keep up
that pace.

After sales at Riley and her husband’s two
restaurants started sinking over the summer, she canceled four cruises
they had booked between November and spring.

She estimates they would’ve spent about $19,000 on the cruises and extras, such as arcade games and spa treatments.

“We don’t have that disposable income anymore,”
she says. “We are hanging in there trying to do the right thing,
waiting for things to get better.”

Source: USA Today

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