New Frugality Hurting Corporations Bottom Line

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The recession has taken it's toll on American culture by making us think before we spend money. Never before, besides the financial devastation of the Great Depression, has America taken the time to really think about the money they spend. Money market accounts are awash with cash just sitting on the sidelines waiting for a better economy. Our friends and neighbors are thinking twice about spending their cash because they are worried what tomorrow will bring. Many people have sworn off the use of credit cards and are paying down their debt and vowing to never to borrow again. We are seeing a new frugality developing in our country.

Some of this frugality has already been a part of many peoples lives. But today it's on the rise. The money we spend and what we spend it on is affecting many businesses. The economy is reflecting this frugality in the bottom lines of business.

Ketchup maker H.J. Heinz has made some noise about how this new frugality has hurt it's bottom line. They state in a press release that this new found "funk" in spending has shaved a few pennies of their profit for the quarter. Don't feel sorry for them their profit for the last quarter was only $251.4  million dollars. To make it worse the company has complained that coupon use has increased by 5%.

This is the kind of news I love to read about. Proof that we are making good decisions with our money. It makes sense to the public, but executives at Heinz find themselves confused. Even with ketchup we are frugal.

In what other ways does frugality effect the economy? If ketchup frugality makes it to the news what other results are on the horizon. Will the increase in savings and the reduction in debt help or hurt the economy. I believe it will benefit and and help heal the economy. Deficits and limitless debt has proved to be a blessing so far, so let's try something else. What's your take? Will saving and frugality help save the economy?

Is Frugality For You?

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If you've been finding ways to indulge on $10 instead of $20, borrow instead of buy, or use cash instead of credit, you're not alone. The "Great Recession" has many Americans shifting from conspicuous consumption to conscientious frugality.

Consumers are putting needs above wants, sticking to budgets, deferring purchases and spending less — and they aren't shy about letting others know about it. In fact, those who have embraced the new frugal mindset are proud of their accomplishments, and they should be.

Here are just a few reasons why:

People with a frugal mindset view money as a tool, not a status symbol.They don't see money as the end result but rather as a means to help achieve a more balanced, comfortable life. So they tend to transfer their spending from things that are less important, such as brand-name products and luxury items, to things that are more meaningful, such as freedom from debt, a home or an emergency fund.

 Those who practice frugality more effectively distinguish wants from needs. They don't interpret essential needs — food, water, clothing, shelter and transportation — as their more upscale counterparts — eating out, Perrier, designer clothing, luxury homes and new cars each year. Instead, they look for value when purchasing necessities. They also recognize extras, like cable TV and magazine subscriptions, as desires — not must haves.

Frugal people track their bills and manage their cash flow. Disciplined spending and budget tracking are at the core of the frugal mindset. Every dollar and expense is accounted for. Saving before spending is the norm. And credit is a last resort.

People who are frugal focus on their long-term goals instead of short-term indulgences. They rarely spend money on immaterial purchases that give them immediate satisfaction. Instead, they are committed to saving for future financial goals, such as college for their children or retirement.

For consumers who embrace it, frugality has an upside. It's a shift to a new value system and provides relief from the burden of "keeping up with the Joneses." It's even helping to bring some households closer, with more opportunities to spend time together at home playing board games, participating in outdoor activities, preparing meals and watching TV as a family. And here’s one ancillary benefit to this lifestyle: Parents are leading by example, teaching their children how to save and spend more responsibly.

So is the era of conspicuous consumption gone forever? Evidence suggests that, as with the Great Depression, this change in consumer behavior toward frugality will last even after the economy gets back on its feet, largely because consumers have less confidence in the economy and are less willing to run up debt. But only time will tell if the new frugal mindset is permanent. One thing is for certain: Living within our means could be a very good thing.