Sunday, April 24, 2011

What Prompts You to Change?

With gas prices at $4.25 a gallon in my area, everyone's talking about driving smaller vehicles, hypermiling, carpooling, etc. So I started to wonder what can really change people's behavior when it comes to handling money. Perhaps more importantly, how permanent is it?

The last time gas prices went off the chart, Americans collectively reduced the amount of driving we did and stopped buying SUVs. Some thought it was going to trigger a movement towards green energy as well as a realization for us to stop consuming so much oil. That consumption reduction didn't last long though. Gas prices lowered and we pretty much went back to our old ways.

So what really causes us to change our behavior? My own determination to be more financially sound came as part of a realization that it's ridiculous and unfeasible for me to live beyond my means. Of course, the Great Recession gave me a big push, too. I graduated into the worst economy since the Depression. It was not easy to find a job, and I saw people around me getting laid off. It made me realize that being a "real" adult is not as simple as it looked. Along with it are responsibilities to hold down a job, manage my current finances as well as to be able to save for retirement. The great thing is that recognizing this early on in life helps me make frugality a permanent thing. I don't claim to be perfect, but at least I'll be aware of what's at stake when I make decisions.

I believe when it comes to money, most people have no idea how much goes out until they really sit down and calculate it. We tend to underestimate how much we spend and overestimate what we have. Before I started budgeting and doing my own taxes, I was often guilty of the same thing (still am sometimes!). Sadly, a lot of times, it comes down to some sort of a catastrophe for us to change. Even then, the changes can be short lived like the gas consumption dip a few years back. Before it was even announced that the Recession was officially over, I started seeing the term “frugal fatigue” everywhere. Sales of luxury goods and the amount of debt Americans take on are continually rising. Sure that part of it is because unemployment is down and salaries are rising slightly, but a lot of it is because frugal is no longer in vogue like it was a few years back. I’m really hoping that the lessons learned during these tough economic times will stay with the general public longer, especially for those in my generation. Ignore all of that noise about frugal fatigue. Keep a balanced financial life. Allow yourself to splurge a little sometimes while never losing sight of the big picture.


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