The results are in: the latest Gallup poll shows that more Americans prefer saving money to spending it. This is no news to retailers, as many major chains have been experiencing unusually low sales for the holiday season. Sales through Thanksgiving and Black Friday were surprisingly lackluster — a warning sign that, for various reasons, shoppers aren’t feeling as spend-happy as they have before.
While reasons for spending less this Christmas are likely as unique as the individual, here are a few of the main motivators behind this spending trend.
High rates of unemployment
In the last several years, national unemployment rates have been above 7%, higher than the “healthy” 5-6% range we’ve experienced in the past.
The loss of a job, or the inability to find one, has many families scrambling to pay their bills, and has significantly reduced discretionary spending.
On a hopeful note, the unemployment rate is trending to drop to 7.2%, the lowest in five years. This is largely thanks to an increase in jobs. Employers have added roughly 200,000 new jobs each of the last four months, a good sign that the unemployment rate may continue to drop, allowing the economy to experience a boom. On the other hand, if spending continues to remain cautious, it could hurt the economy.
Doubts about the economy
The recent government shutdown left many people worried about the future of our economy. Some who are dependent on government welfare programs, such as SNAP or WIC, are already expecting to see cuts to their benefits — and may see even more if the government chooses to reform the system. This concern, of course, has affected their spending.
Then there was the controversial and tumultuous launch of the Affordable Care Act. One of its unforeseen side effects was that many insurance providers were forced to eliminate some plans and policies, directly impacting thousands of insured workers. (Thankfully, a provision is being made to allow current policies to remain in effect for a year’s time.)
In addition, insurance costs for some people are expected to increase. Those affected will likely be more cautious with their spending this holiday season.
A shrinking from consumerism
Those who’ve seen the effects that excessive credit and and speculation had on the housing market, as well as the economy in general, are shrinking away from debt. This is especially true of both Millenials and Generation Y, who are learning from the mistakes of the previous generations’ debt problems.
It also appears that people are just tired of the materialism and consumerism that’s so prevalent in our culture. Many big-name retailers caused protests and boycotts this year because of their even earlier Thanksgiving Day sales, which cut into what many consider family time.
A desire to reach savings goals
It makes sense that if you keep on spending and not saving, you won’t be able to accomplish your financial goals, whether they’re as simple as starting an emergency fund, or as significant as buying a house. People are catching on to this and, as the Gallop poll indicates, are choosing to save. Saving really is the key to financial freedom.
While this trend may disappoint retailers, who have been extending deep price cuts into December in hopes of boosting their sales, it won’t disappoint those who are able to regain control of their finances.
Have you cut back this Christmas? Why or why not?
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We definitely spent less, many relatives don’t wish to exchange. Kids are growing up and requesting items. So, I set a budget and they stayed in that. I found a few special gifts for my kids. But I also made many gifts. I love to give and one way is to craft gifts. I usually make about 40 items to give. That way I save money and enjoy the process. Hopefully they enjoy receiving.
I focus on the music, baking, cooking, entertaining, going to the theatre and special events. That way the holiday is all month long. More bang for the buck.
This January, our family will be putting more money into savings instead of paying for Christmas gifts like many families. We stopped the greedfest shopping several years ago. The only major shopping was during the triple coupon event at one of the local grocery stores last week and the super grocery sales this month. The cabinets, refrigerator/freezer, and pantry are now full. Looks like our grocery bill will be $10-20 per week for a few months for milk/eggs and fresh produce.
We rotate our old Christmas decorations. Only sent our eCards. I did cook a holiday meal AND Thanksgiving dinner for the extended family. That $100 is well spent for 2 feasts. This was a good year for deals on ham and turkey. I cooked cheaper sides and desserts. The meals were cooked and served at my parents’ home so that they could enjoy family. Leftovers aplenty.
Over the past couple of decades, the Christmas season greedfest has gotten out of control. By stopping the excessive consumerism, my family now has a stress free and enjoyable holiday season.
Actually I do not think it is political. And what is wrong with celebrating Christmas or any of the Holidays without spending money? The true meaning of the season is more about family, friends and celebration. Honoring your beliefs and core values. For me money is not it. Granted we need it to survive but do you really need access to Angry Birds??? True, people are struggling. I am one of them. I have a son who has been unemployed for almost 5 years–since the crash. He relentlessly is looking for work but is being crushed by student loans. I have been helping him pay those which has endangered my retirement–but family is more important. People are not the lazy, or want to take a handout, takers that so many of the “working” class want to name them. They are frustrated, educated, and losing hope. They would rather be working and yes, they take whatever job is offered or try to go into business themselves. Welfare is NOT the lifetime career many think it is. FIVE YEARS is the maximum and it has been for about 20 years. After that, they are homeless, broken and resemble the poor houses in Dickens tales. It is easy to brush them off as irresponsible when you never HAD to walk in their shoes. Only those who never have been there are minimalizing their situations. At age 20, I was working 2 part time jobs just to make the rent. I had no money for food so I went on food stamps. I had no car, no insurance, and I struggled to live. Through it all I did manage to graduate college, get a good job, and became owner of my company. I never begrudged anyone of food stamps, unemployment, or assistance. Why? Because ANY twist of fate could land me back there where I was at 20. It was a miserable life. To say people enjoy living like that is nonsense and cruel. So this Holiday be thankful for what you do have. Be grateful. Be helpful to others and less vindictive. You could easily be in their shoes.
It’s easy to demonize nameless, faceless people. When you start to know people in that situation, it’s different.
I’m a big fan of not spending too much on the holidays. I prefer to spend time with family, make gifts by hand.
Yeah, I am definitely sticking to my budget this year. I really don’t have much choice in the matter. We simply have less money to spend.
I’m actually ok with people spending less over the holidays. This time of year should be about connecting with friends and family, and not shopping and consuming. I always cook food for gifts and it is always cheap and people love it.
Sure it is a signal that times are bad economically, but maybe people will realize what it is important and get their priorities straight. When the economy recovers we will hopefully retain some of those lessons. People should focus on their savings goals and financial stability and not who can buy the best gifts.
Phil,
You’re absolutely right! But they’ll keep voting for those government hand outs. God help us.
You know, I wish I didn’t have to say this, I really do. I wish politics did not factor into a story like this, but it does. Those who voted for Obama a first AND second time, well, you asked for this. You keep thinking government intervention is the answer, and sadly it has the opposite effect.
I personally have my emergency fund in place, and I pay for everything with cash. If things hit the fan for me, I will be more than ok.
But I would also like to make one more point. Can a lot of these people not find a job, or a job they are willing to do? I would do anything to not be at home all day collecting a government check.
Things need to change. I believe in limited safety nets, and prefer private institutions provide them. But things have really gone too far.
Asked for what? As far as I can tell, things started going south during Bush.
I, for one, am happy about the ACA. It’s one of the reasons I voted for Obama. He is, in fact, the first President I voted for who actually WON (and I’ve voted every year except one since 1988). Why? Well, I have insurance through my work and my husband’s work. I’ve seen the costs go up and coverage go down every year for the past 13 years or so.
But I have friends who are now able to be insured! Who work at jobs where they don’t offer insurance and can now afford to get it. Who have “pre-existing conditions” that made them uninsurable. Who got laid off from a job and cannot find another one that offers insurance or pays enough. I’m really kind of tired of hearing about these people who are lazy. Yes, there are people who legitimately cannot find a job (including my college roommate’s husband who was forcibly retired after 20 years in the Navy. And whose retirement funds alone cannot feed 3 teenage girls.)
Maybe you would be willing to do anything to avoid getting a government check. What do you do if all you can find doesn’t pay enough for child care? Would you work minimum wage for 20 hours a week if unemployment pays more?