Blessed Are the Frugal

I once thought I might have to join, or start, a Penny Pinchers Anonymous group. Frugality seemed old-fashioned, something left over from having parents who remembered the Great Depression. It seemed almost like a psychological problem or perhaps a bad habit to some of my grad school friends. But I continued down my frugal track from  necessity (I have always worked for non-profits) and a deep belief that there is something really good about it. Rather than confess it, I’d prefer to extol frugality and convince others of its benefits. The time is right for that, after three years of recession. What once seemed out of date, now seems more popular, a recognized beneficial habit, like exercise. I’m not alone in thinking this either.

It was just reported that on average, Americans are cutting back on their expenditures and increasing their savings. These two recession-prompted behavioral changes, could, if continued, bode well for the nation’s long-term economy. The Federal Reserve Bank of New York reports that in 2011 Americans have 7 percent less mortgage debt, 12 percent less auto loan debt and 15 percent less credit card debt than they had in 2008. They are also setting aside more than 5 percent of their disposable income.

Put in perspective, however, that savings rate is still lower than the 7 percent average of the last five decades. Yet if lenders continue to require high credit ratings of borrowers and job growth remains stalled, as predicted, the savings rate of Americans could soon equal or exceed past averages.

Paying off personal debt and living within one’s means are healthy practices. As individuals become more financially secure, they will tend to spend again, stimulating demand for goods and services. And as debts are paid back, lenders will ease their standards. Truth is, this will take time.

Meanwhile, as the cost of living rises, frugality will become essential. When higher taxes come (they will) and federal and state subsidies dry up (they are), savers (not just high earners) will be among the few able to afford a home, even if that purchase has to be delayed until one’s savings grow. Savers also can prepare themselves for retirement as employer-sponsored pension plans disappear and 401k (403B) plans become the norm. Savers give themselves a modicum of security, whatever the fate of Social Security.

Reduced spending and increased saving are not just a silver lining in a dark recessional cloud. These indicate a return to responsible stewardship. To that, I say, Hurrah!