Are You Just on a Recession Diet?

by Miranda Marquit · 18 comments

If you are a chronic dieter, you know that long term, diets don’t work. You do really well for a while, pushing to lose the weight, but once you reach your goal, you gleefully go back to the habits that got you in trouble in the first place. I know. I’ve been there. In order for a diet to work, it has to be more than a, well, diet. It has to be a healthy lifestyle change. And that sometimes means that you make more gradual changes that you can live with, developing long term habits that stick with you long after you have reached your goals.

The recent recession has prompted many to save more and spend less. However, the worry is that this is more of a “recession diet”, rather than a long term lifestyle change. Which means that as the economy comes back online, people will slip back into their old ways. If you don’t want this to be you, the key is to look at things you have been doing to create a better financial foundation during this recession and hold on to them. Here are two of the major concerns associated with the end to a recession diet, and how you can combat them:

#1: Spending More

As signs of economic recovery emerge, it is likely that you will feel more confident. This means that you could start feeling more comfortable with spending more money again. The fact that this is the holiday season only reinforces the idea of opening one’s wallet a little wider. It doesn’t mean that you can’t do a little extra spending on occasion, but you do need to keep the impulse under control. Below are some suggestions for keeping your spending under control as the economy improves:

  • Set aside “splurge” money. Once that money is gone for the month, it’s gone.
  • Avoid places that are more tempting to you. Once your splurge money is gone, stay away from temptation and focus on less expensive excursions.
  • Think of what you could do with the money instead. Consider how you could grow the money for retirement, help your child pay for college or going on a nice trip in six months. Set goals so that the “extra” money you feel comfortable spending has a purpose.

#2: Saving Less

With high unemployment, less hours and open enrollment for health insurance reminding you that things are a bit tight, it’s easier to remember to save. But as the economy improves and you feel more financially secure, you might be tempted to put a little less away. In order to avoid this, consider making your savings automatic. Have a portion of your paycheck automatically deposited into a savings and/or retirement account. That way, the money is not even considered as part of your discretionary funds.

Realize that economic cycles are natural. Every time there is a boom, it is followed by a bust. Things can’t go on growing forever. Remind yourself of this recession, and prepare for the next. You don’t have to stop enjoying yourself, but you shouldn’t abandon the good habits you have started developing. Make the shift to a lifestyle of good financial choices, and you will find that when the next recession hits, you won’t be as susceptible to the money problems that come with it.

Who knows, you may not even need to go on a recession diet next time.

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{ 18 comments… read them below or add one }

Financial Samurai December 15, 2009 at 5:26 am

Setting aside splurge money sounds like a good idea.

I almost splurged on a car these past 30 days, but i didn’t. I stood down like a good soldier, even when the guy hit my low bid. The temptation was great, but I keep thinking back to the words “SIMPLIFY MY LIFE”.

I don’t want no more junk, even if bonuses will be large this year due to the rebound. Must stand strong.

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MoneyNing December 15, 2009 at 9:41 am

It’s tempting isn’t it? Buying just because “you can” even though almost always, simplicity is what makes us happy.

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Financial Samurai December 15, 2009 at 12:29 pm

Yep, the less I have, the more I can focus what I do have. The accumulation of stuff never ends, so it’s important to just focus on what you really need and want.

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George December 15, 2009 at 7:12 am

What a great way to start a post about money. Every day I see and hear people talking about losing weight by dieting. Unfortunately, as you said, diets don’t work to make people healthy and happy. I guess you can say jobs don’t work to make people wealthy and happy.

I think the solution is education and motivation. Educating people about how money and investing works. And motivating people to use that knowledge to make money to achieve financial freedom instead of working in a job and saving money.

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Miranda December 15, 2009 at 10:32 am

I agree that education and motivation are very important. These two principles would go a long way in helping people reform their money habits into something that is a lifestyle, rather than a short-term change.

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Max December 15, 2009 at 8:07 am

Great article, love the dieting metaphor.

It seems to me that there is a delicate balance between spending more/saving less and the recovery of the economy.

Even though people have been on a financial diet during this economic downturn, which is indeed a good thing in many ways, part of the recovery of the economy depends on people spending more money and saving less, as that’s one of the basic principles of consumerism in a capitalistic society.

If people continue to spend less money and save more money, then it’s likely that businesses that produce and sell products will continue to fail and layoff workers, which in turn will result in more people being able to save and spend less money.

While this economic crash diet may be a good thing, like many doctors will tell you, a balanced lifestyle of healthy eating and exercise will benefit you more than any diet over the long run.

But as many lifelong dieters will tell you, carrots are just not as tasty to eat as cake, and eating carrots won’t help the bakeries stay in business.

Unfortunately, America has based its economy on the spending of its people. I mean, there are malls on every corner, advertisements pervade every aspect of our cities, and “living the American dream” is all about being able to afford the good things in life.

So unless we change our DNA, we may be able to lose some weight and look a little better to our friends, but we’ll never be healthy, as we were born to bulge.

Of course, the carrot farmers will be happy, but unfortunately, they don’t spend as much money on advertising as Dunkin’ Donuts does.

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Miranda December 15, 2009 at 10:34 am

I think it’s too bad that our economy is so dependent on debt-fueled consumer spending. And we are dependent upon it because it’s more exciting. We could have a more sustainable economy (though natural downcycles will always occur), and a more stable economy, if there was more of a balance between debt driven consumer spending and saving. But since it’s more exciting to have explosive growth, as a society we are, unfortunately, likely to stay more or less on the same course. Unless we all band together to change our money lifestyle…

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Craig December 15, 2009 at 8:46 am

I try to keep my spending balanced regardless of the recession. I save for travel, and the experiences I like to take part in. In that sense my spending hasn’t changed at all.

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kenyantykoon December 15, 2009 at 8:51 am

these two things that you have mentioned are the Achilles heel for most of the frugal bunch. these are two things that i find very hard to control particularly splurging on eating out but the solution that you have given is what i have been using and it seems to be working out very well. i just avoid being anywhere near a nice restaurant, fast food stand, bakery and it is quite hard seeing as how i like diversified cuisine :)

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MBAbriefs December 15, 2009 at 9:28 am

I would hope the current recession has been bad enough for most of us to adopt the life-long frugal habits of my grandparents’ generation who grew up during the Great Depression. They were a great financial role model for me when I was a kid and I hope to pass on the same financial sense to my children. I watched them reuse things to be economical long before reduce-reuse-recycle became a catch phrase, shop with coupons, make clothes and blankets, grow and can their own vegetables, and make most of their food from scratch, even though they had the money to not have to do all these things. My one grandfather worked part-time well into his 80′s and also had rental properties, and my other grandmother had a home-based business well into her 70′s. They both just recently passed away but I hope their legacy can be passed on to future generations in my family.

I’m with Financial Samurai on spending, even if I’m tempted I’m going to hold fast and simplify my lifestyle.

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John DeFlumeri Jr December 15, 2009 at 10:08 am

We’ve all seen it, at the first sign of things getting better, some people go crazy spending and taking on new crushing installment loans.

John DeFlumeri Jr

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Bobby December 15, 2009 at 4:13 pm

Thanks for the posting.
I think a vast majority of people try to live up to what they make as opposed to living comfortably. We will, as a nation, get back to the big spending. I have yet the desire to impress people I don’t know buying things I don’t need.

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sam December 16, 2009 at 1:39 am

I think this is good advice, especially setting up a way to transfer the money regularly into a savings account every time you are paid. I try to be good and transfer the money myself each month when I pay my rent but sometimes when I think just in case I leave the money in my account and then it just gets spent. As mentioned above by Bobby I think people will soon stop saving and get back to big spending.

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CD Phi December 16, 2009 at 3:56 pm

I think saving any time possible is great. That way if I ever get laid off, I’ll know that I have some cushion to fall back on. Interesting analogy.

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Banks December 16, 2009 at 4:17 pm

Hopefully the recession diet will be a more common way to consume. Our society needs to saty on more than one tyoe of diet for soem time.

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Andrew @ Financial Services December 21, 2009 at 7:33 am

It’s in the culture. We eat a lot because we can. We spend a lot because we can. They don’t live like us in other parts of the world and maybe it’s about time we took a cue (something we should’ve done a long time ago) Hopefully all of us learned a lesson from this.

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Kevin Tan January 6, 2010 at 4:57 pm

I am inspired by these comments. Knowing that a lot of people are really getting a frugal mindset that is essential to wealth building. However, I have a related question to this frugality mindset: Would you consider to invest your hard-saved money on a franchise? I mean a lot of people are savings but most of them don’t know where to put that money to grow.

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Jeraldine Charlton April 17, 2012 at 4:40 am

It seems to me that there is a delicate balance between spending more/saving less and the recovery of the economy.

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