Are We Learning a Lasting Lesson From the Economy?

I was reading a blog that I enjoy the other day called Bing's Blog. He has a post about things that we've learned during this economic downturn that we should, but probably won't remember when the economy turns around. Item #5 on his list worried me a bit.

It seems that everyone is more aware of their spending habits these days, which as the Money Maiden, I think is fabulous. But he predicts that we'll all forget that unchecked consumerism and no savings were problematic, and that we'll all start doing it again. I imagine that he's not far off the mark. I look at my grandparents who grew up during the Great Depression and their lifelong frugality. Don't get my wrong, my parents are very responsible with their money (they taught me after all), but they aren't as stingy as my grandparents were. So if I were a betting woman, (I'm not, that's not responsible money management!) I'd take the bet that once the economy recovers, some of the people who had become more responsible out of necessity will go back to their old ways. But I hope that not everyone does. I hope that we as society start focusing on saving money, and producing things for others to buy, instead of trying to build our wealth from a house of cards like we did in the past.

How Hipsters Manage Their Money

Do you want to get a handle on your money, but you think an Excel spreadsheet is far too antiquated? Check out the NPR All Tech Considered blog where you can find a number of websites to help you manage your money, many that have a social networking aspect to them.

And if you need help with the psychology of your spending and not just tracking your spending, here's a helpful website: Your Money or Your Life

Retirement Savings Accounts

If you have a retirement savings account right now such as a 401(k) or IRA, you probably cringe every time you see a new statement. You look at the earnings line and it's always a significant negative number. You look at the balance and it's less that it was a year ago.

But don't panic, especially if you have a while to go until retirement. Just hold steady and know that right now you're "buying low." The markets traditionally rebound very well after significant losses like these, so you'll likely catch up to where you were fairly quickly once the recession ends. This is another reason why it's important to start investing as early as you can, so you're better able to weather the ups and downs of the market.

The chart below is a simple example of what happens when two people both invest $100 per month when they both have 30 years to go until retirement. John starts investing immediately while Steve waits 10 years. Who would you rather be: John or Steve?

Spending Less Money

Barbara Warmsley, also known as the "Green Granny" is posting videos on youtube with ideas about how you can spend less money. I saw an interview with her where she discussed the fact that she grew up during WWII and learned how to be frugal. My grandparents who grew up during the Great Depression also learned to be less wasteful and to make better use of their items than my generation.

These videos have some good ideas that just might help you to stay within your budget. They might also trigger some of your own ideas about ways to save money.

Teaching Kids About Money

My children receive an allowance (which is a part of my budget) in an effort to teach them about money management. My daughter hoards her money and whenever she wants something, she's always got the money to be able to purchase it right then. My son, on the other hand, spends his money every time he's saved up enough for his current action figure obsession. So he always has to save before he can make a purchase.

Kids have different personalities, even kids that share the same gene pool and grow up in the same house. They view money differently so the lessons that have to emphasized vary, but there are still lessons for each child. Both of my kids are learning how to earn money. They're both also learning about value, when it's alright to spend, and when you should save. My son is (hopefully) learning about delayed gratification and that he can wait to get something he wants; a lesson my daughter seems to understand inherently.

What lessons are your children learning about money? How do you teach them? Do you believe in allowance? Let me know your thoughts in the comments.

Expectations

Contentment with your financial situation (as well as life in general) can come from managing your expectations. Instead of thinking of everything you can’t afford or how little you have; try thinking of how much you really do have. Imagine what life was like for people a few centuries ago, or look at some of the poorer countries today. The average American has more than royalty did a few centuries ago.

Even if you can’t afford a fancy TV or video game set, chances are you’ve got a computer and a TV. You have indoor plumbing and heat. Focusing on what we do have and what our money does buy for us helps us to understand that we don’t need to strain our budget to the breaking point to find happiness.

The Stress and Money Cycle

Are you feeling stressed right now? Many people are. There’s a laundry list of concerns right now that contribute to feelings of stress.
• The economy
• The unemployment rate
• Housing foreclosures
• Added responsibilities at work
• Fear of losing your job
• Difficulty finding a new job

All of these concerns and many more are making this a particularly trying time for lots of folks. One common response to these feelings is to do something nice for ourselves. This is a wonderful reaction; unless it spirals into a vicious cycle of spending unbudgeted money that leads to more debt which leads to more stress.

There is a good way to break or avoid that cycle altogether: include money in your budget to treat yourself. It might mean trimming elsewhere, but it can help you to manage your anxiety without adding additional burdens or concerns.

During these difficult times it’s important to discover and pursue what feeds your soul. For some people it’s a trip to the movies, for others it’s a relaxing massage, or some really lucky people feel renewed by taking a quiet walk outdoors (that one doesn’t even require budget maneuvers!) Just remember, it is so much more rejuvenating when you spend budgeted money on yourself guilt-free.