How Our Spending Patterns Have Changed Over the Last 100 Years

The following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

Do you go out to eat several nights a week?  Do you feel like you’re just getting by financially even though you have a decent income?  Do your kids have so many clothes that they can’t close their closet doors?  Do you have three cars in your driveway?

Think back in time 100 years ago to 1917.  Our finances and conveniences have changed drastically since then, yet many of us still feel dissatisfied and that we don’t have “enough.”  Why is this?  Why are we unfulfilled when we have so much more than our ancestors who lived 100 years ago?

Our spending habits have changed dramatically since then, but we’re still not satisfied.

 

Spending Habits in the Year 1900

The Atlantic put together an eye opening article about how drastically our lives have changed since the year 1900.  Back in 1900, “A quarter of households have running water.  Even fewer own the home they lived in.  Fewer still have flush toilets.  One-twelfth of households have gas or electric lights, one-twentieth have telephones, one-in-ninety own a car, and nobody owns a television.”

Just stop for a minute and imagine being without these things.  If a 1900 household didn’t have to pay utilities, make care payments, or purchase a television, cable, Netflix, etc., how did they spend their money?

According to The Atlantic, “Families [in 1900] spend a whopping 80% of [their money] on food, clothes, and homes.”  Eighty percent!   More precisely, this breaks down to approximately 43% for food, 14% for clothing, and 23% for housing.

Undoubtedly, life in 1900 was simpler in some ways, but a family needed to be diligent with their money just to take care of the necessities of life.  There was very little leftover for extras and “fun money.”

 

Spending Habits Now

Thanks to outsourcing our textile industries to foreign countries, our annual apparel cost is only 4% per year, and yes, that includes those big spenders who have many, many more clothes in their closet than they will ever be able to wear.  Thanks to big company farms, our food costs are now only 13% of our annual income (The Atlantic).

While it cost 57% of an annual income to pay for food and clothing in 1900, now those same categories only require 17% of our annual income.  That’s a lot of extra money left over.

In 1900, housing costs were 23% annually, while they are now 33%.  That accounts for some of the difference.  Health care is now 6% of our annual spending; it was 5% in 1900.  Another category that is now costing us more is transportation.

However, there can be no denying that our interpretation of “necessities” has changed.  We now consider many luxuries necessities, and that mindset is squeezing our budgets.

 

How Americans’ Attitudes Toward Spending Have Changed

My husband and I like nice stuff as much as the next person, but for the 16 years of our marriage, money has always been tight.  We’ve always been a one-income family.  First, I worked full-time while my husband attended graduate school full-time.  Then, when he graduated, I stayed home with the kids while he worked full-time.

Thanks to student loan payments and a fairly average income while living in a high cost of living area (Chicago), we’ve always had to live on a fairly tight budget.  That means we were a one car family until this last fall.  For 15 years of marriage, we made do with one car.  That car is now 12 years old and has nearly 180,000 miles on it.

We rented until we finally bought our first house 2.5 years ago.  In many ways we were more like a 1950s family than a family living in the 21st century.

In the book, The Overspent American, Jennifer Lawson, who participated in a focus group on spending said:

“In the fifties, growing up in upstate New York, my parents were considered middle-class pillars of the community. My father was an accountant. It’s a fairly poor rural area, and most people worked in a factory or waitressed or something. My dad was actually a professional person with a sign out in front. [My parents] had one car, and they drove it until it fell apart, and then they bought a new one, usually a station wagon. They had a fairly modest house. We took a vacation as a family for two weeks and rented a little cabin in Maine. And drove–nobody flew anywhere. I can’t remember anyone who had a second car. Everyone walked everywhere; children certainly didn’t have $100 sneakers. It amazes me now that my younger brother, who still lives there and who has a job that’s roughly equal to the job my dad had when I was growing up … he has three teenage daughters. And since they were about nine, they’ve each had their own color TV, and they have their own CD players, they all have their own telephone lines, because they complain about calls not being able to get through” (The New York Times).

Our lifestyles have changed dramatically since the 1950s, even more so since the 1900s.  What we now consider necessities—two cars per family (at least), exotic vacations, designer clothes, Internet access and cable tv, college education, just to name a few—were not priorities, or even available, in earlier times.

 

Another phenomenon of spending is that the U.S consumer is quickly bored by what he has.

We can see this phenomenon whenever new electronic devices are released.  Even though their current smartphones, iPads, etc. are working just fine, people are eager to get the newest release.  Never mind that it may cost hundreds of dollars that they really don’t need to spend.

The same mindset is present when people choose to lease a car rather than buy it so that they can continually have a “new” car to drive every few years.  Never mind that leasing costs them much more than buying a car, especially if they buy a used car.

People also frequently redecorate their homes, even though what they have is working just fine.  When they redecorate, they often buy all new towels, couches, etc., depending on what room that they’re “updating.”  Now, we tend to replace long before an item is worn out.

This is a luxury that people in the 1900s didn’t have.  My grandmother, who lived through the Great Depression, regularly washed out plastic baggies over and over again.  Rather than throwing them away, she would get 5 to 10 uses from each bag.  If something like a kitchen towel got a hole, she didn’t throw it away; she mended it.  We’ve lost that bit of frugality that earlier generations developed out of necessity.

Undoubtedly, many in the middle class are feeling a financial strain.  While some of that is due to modern day high costs (such as earning less money because our employers have to take so much out for taxes and insurance costs), much of it is also due to our increased expectations and standards.

The next time your budget feels unbelievable tight, look around your house and see how much you have compared to what your ancestors had 100 years ago.

How about you all? Is there a “necessity” you can do without to find more room in the budget?  Can you be content without the latest new electronic upgrade?

***Photo courtesy of http://www.idpinthat.com/edit/5340

Do You REALLY Want to Be Rich?

The following post is by MPFJ staff writer, Marie. You can read more of Marie’s articles over at her own blog, Family Money Values. Enjoy! 

Let’s face it, most of us aren’t part of the elite 1% financially.  Many of us live paycheck to paycheck.  A lot of us using part of that paycheck to service our debts.

As of 2014, in Canada, the median income was $78,870.  However, the average salary in Dec of 2014 was just over $49,000 (Statistics Canada). Canadian consumer debt topped out at $21,348 in early 2016 (CBC News).

Forty Nine Grand isn’t a lot to cover the cost of housing, food, transportation, education, health care and entertainment for the typical family of four, let alone trying to get those debts paid off and put something aside for old age.

Perhaps we struggle through our daily lives, rising groggily for that 5 AM buzzing alarm to hit the road to hang onto that 9-5 job; searching all avenues to find the best prices on the items we need or want to buy; choosing between paying down the credit card or the mortgage; and shopping that garage sale instead of buying retail while wondering how life would be different if we were rich.

Who hasn’t bought a lottery ticket, knowing the odds against winning are substantial?  The mere possibility of having gobs of money raises visions of luxury and abundance in our minds.

 

A Vision of what it is like to be Rich

Just think about it!  You would not have to work for a living, someone else would clean your house, mow your grass, and worry about paying the bills.  Vacations would be a blast – whether staying at your own vacation villas in different parts of the world, touring the world from the deck of your condo/cruiser or taking off in your private jet for a dinner meeting in another city.

You would never again have to decide whether to pay down the credit card or beef up your savings; wait to buy the latest tech toy; or dream about having your own swimming pool.

The vision is tempting, but is real life as a rich person really going to match that vision?  Probably not.

There is a reason that old saying ‘The grass is always greener on the other side of the fence” is still around.  Even Royals may wonder – as in the musical Camelot when GUENEVERE sings:

” What else do the simple folk do  To help them escape when they’re blue?  and King Arthur answers:

“They sit around and wonder what royal folk would  do And that’s what simple folk do”

Wondering how the other half lives is a prime pastime, allowing folks like Robert Frank (CNBC & Secret Lives of the Super Rich host) to even make a good living from exploring the topic publicly.

What being rich can mean

Becoming rich won’t make you a new person.  Being rich won’t fix most of the things you feel are wrong in your life.  Rich or poor, we all have issues.  We all make good and bad choices.  The rich just have more opportunity to make the bad ones!

 

What can be good about being rich

You have financial independence – no more trudging to that boring 9 – 5 job each day.  You can do what you want, when you want (as long as you know what you want!).  Riches usually bring a level of comfort to your situation.  It reduces stress to know that you have the backing to keep your life from tanking if a few things go wrong.

You have the financial ability to pursue multiple interests.

Lets face it, sometimes pursuing opportunities, hobbies or interests costs money.  You can set yourself up in your own business, move to that elite neighborhood so the kids can team up with neighbors in the know; start that charitable organization to help out your favorite cause or buy and restore that vintage auto.

Being rich provides opportunities to help others.  Money can help you make a difference in your world – allowing you to sponsor the education of a child in your area; helping out that senior who can no longer get out to maintain her home; or even just shoot off a check to your favorite political candidate.

Money helps you make more money. 

It can be a great passive income generator if you invest smartly – allowing you to maintain your new level of wealth and perhaps even pass it along to your next generation.

Riches can solve problems.

Having plenty of money may help alleviate some stress and help you sleep better – no more staying up worrying about paying the bills.

Wealth allows you to get where you need to be.  You don’t have to plan months ahead to catch a flight or get to that event – you have the backing needed.

If you have medical issues, wealth can help.  You can afford that special medicine or ignore the constraints of insurance.  In fact you may decide to enlist special health care, such as concierge doctors.

 

Some of the potential negatives rich people may experience

No matter how rich you are, it is probable that you can’t have all of the things you want all of the time.  Like the rest of us, you are limited to enjoying some of the things you want (but maybe all of the time) or all of the things you want (but maybe just some of the time).  Rich people still have to make choices about what they spend.

Being rich might make you a target.

Many really wealthy folks try to hide their wealth, attempting to avoid situations where relatives, friends and strangers ask for money.

Rich folks may have security issues.

Depending on wealth level and general public knowledge of their wealth, the rich may need to have safe rooms, bodyguards and may worry about their children being kidnapped and held for ransom.

Wealth can make you subject to lawsuits.

It is an unfortunate fact that the world is full of unscrupulous folks who might make unjustified accusations about you – filing lawsuits to try for some of your wealth.

Some rich folks work long hours at high stress jobs.

If you earned your wealth, there is a good chance you have been and will continue to put in long hours to keep the money flowing. Work life balance remains out of kilter and health issues can result.  Time away from home affects family life and relationships.   In fact, it can be a major complaint for children of first generation wealth producers.  They don’t really develop typical relationships with the earning parent.  That parent is not there.  The child is raised by surrogate parents, like nanny’s or sitters and can only see the parent from afar.

Having money may result in behavioral expectations.

The sad story of Princess Diana comes to mind.  The Queen, the Prince and others in the royal household had definite expectations about how she should look, speak and behave as well as the kinds of activities in which she should engage.  If expectations don’t match your desires, problems result.

Privacy may be at a premium.

Not only may you be surrounded at all times by household or other employees, you may also be subjected to pestering by the press, or the public.  What you do, say, spend on or wear may become news!

Managing household employees may not be your cup of tea.

Although it might be great to never have to dust or clean out a toilet bowel, I doubt if it is much fun interviewing or managing maids, gardeners, butlers and the like.  Having to let someone go is a stressful event, yet you can’t allow shoddy work, right?

You may lose your sense of worth or purpose.

If you become rich, you may find that striving for money and having it are two different feelings.  While you are striving, you are working towards a goal, making an accomplishment happen.  Once you are there, you may look around and say, so – now what.

Your kids may grow up spoiled.

Giving children everything even before they think of wanting it can lead to a sense of entitlement.  How do you raise grounded kids when you are rich?  What is your logical stance for having them learn the value of work – when you pay other people to do yours?

People may treat you differently.

Stories of lottery winners losing life long friends abound.  People knowing about your wealth can make them treat you differently, or cause them to expect you to behave differently (like pick up the tab for everything!).  Former friends may start to exclude or ignore you.  You may be treated with (undeserved) obsequious behavior by strangers in hopes of favors.

You may either give up some control over finances or spend a lot more time managing investments.

Having money brings the responsibility for making sure it is managed well.  Doing it yourself may eat up more time that anticipated.  Having someone else do it results in a loss of control and a less than desirable sharing of private information.

You aren’t inhibited financially from making really bad life choices.

If you have a propensity for drinking, gambling or drugs, finances are no longer an issue.  You may find yourself deep in an addiction cycle.

Likewise, you can’t blame a lack of funds for avoiding pursuit of opportunities that come your way.

Although many of us think we want riches, having them isn’t all cake and pie.  Money is only a tool.  It won’t make you a better person, give you everything you want or make your life paradise.

So, are you sure you really want that the rich life?

***Photo courtesy of https://www.flickr.com/photos/jayphagan/8610311915/

What’s Your Spending Personality?

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The following post is by MPFJ staff writer, Kelly Gurnett. Kelly runs the blog Cordelia Calls It Quits, where she documents her attempts to rid her life of the things that don’t matter and focus more on the things that do. You can also follow her on Twitter and Facebook.

It can be hard to do things like set a budget and create good spending habits when you don’t know your spending personality. 

Your spending personality is a combination of your personal priorities and goals and your own personality quirks—and also possibly a remnant of some habits you unconsciously picked up from your parents growing up.

            
Understanding your spending personality enables you to guard against its pitfalls and ensure that you’re making the best financial decisions for your overall goals, not just doing the same things you always do.

Let’s take a look at some of the most common spending personalities, and then (once you’ve identified which one you are), we can discuss how to handle them.



If you…

            
…Often feel like you just “have to have” something the instant you see it, can easily justify the reasons why a random purchase makes total sense, and usually come home from a shopping trip with more than you intended to buy…then you’re probably An Impulse Buyer.

            
…Can’t pass by a bargain in any form (limited-time-only sale, clearance, garage sale) and often find yourself bringing home things you don’t really need just because a deal was “too good to pass up”…then you’re probably A Bargain Addict.

           
 …Buy the same brands you’ve always bought, pay for convenience items like coffee on the go or lunches out, and find yourself at end of the month with no idea where all your money went…then you’re probably A Lazy Spender.

            
…Wear your clothes until they’ve disintegrated, wash plastic sandwich baggies so you can use them again, and have great difficulty bringing yourself to purchase anything unless it’s a life or death situation…then you’re probably A Spendaphobe.

            
…Shop for fun, when you’re down, when you’re celebrating something, when you’re bored, or any other excuse you can think of…then you’re probably A Shopaholic.

            
Do any of these descriptions sound familiar?  Then read on to learn how to can curb your natural tendencies and become a smarter shopper.


How to Re-Train Yourself

            
If you’re an Impulse Buyer…It’s time to learn the 30-day rule. Namely, if you see something you love so much you must have it now, put it on layaway (or bookmark it if it’s online) and revisit it in 30 days. Chances are, you won’t even remember half the things you so desperately wanted 30 days earlier. And if you do (and you still desperately want it), then it’s time to consider how it will fit into your budget. That’s right: it’s still gotta pass the budget test. (But if you really do want it that badly, you’ll find a way to make it fit, even if it means sacrificing something else.)

            
If you’re a Bargain Addict…It’s time to learn to resist Shiny On-Sale Object syndrome. Just because something is discounted (even severely discounted), that doesn’t mean you need to buy it. Instead, ask yourself whether you’ll really use whatever it is that’s on sale, and also ask yourself if the bargain you’re drooling over really is truly all that great. If you can start being more deliberate about your savings (clipping coupons and comparing them against weekly store circulars for the biggest bargain), you’ll winding up saving much more in the long run than you would with those impulse bargain purchases…and you won’t have a pantry full of condiments you’d never go through in several lifetimes.

            
If you’re a Lazy Spender…It’s time to start doing some work—that’s the only way around this one. It doesn’t have to be life-consuming work; just setting up some systems and learning to think deliberately about your spending will make a big difference. Set some time aside to create a budget (I know it’s no fun, but you need one), then start picking up tricks like couponing in order to make sure your spending falls within that budget. Once you start tracking your purchases, you’ll see all sorts of ways you can cut out those lazy purchases (like buying lunch meat for sandwiches during the week so you’re not forced to run out for fast food every day).

            
If you’re a Spendaphobe…It’s time to realize that frugality can go too far. While being cost-conscious and learning to live with less is an admirable goal, there are some things that are worth spending a little money on. The key is identifying what your priorities are. If you value time with your family and have a really hectic work life, maybe putting a little aside for a yearly vacation would be an expense worth spending for because it would create memories and give you a chance to unwind. If you’re very health-conscious, it might be worth shelling out a little extra for organic produce or yoga classes so you feel your best. Spending money in and of itself is not evil; spending it recklessly is.

            
If you’re a Shopaholic…It’s time to find some other ways to fill your time and deal with your emotions. If you tend to shop when you’re down, call a friend to vent over coffee or go for a run to work out those feelings. If you shop when you’re bored, take up a hobby or join a class to amuse yourself in more constructive ways. The less free time you have to fill, the less likely you’ll be pulled toward the mall.


Have I missed any of the major spending personalities? What would you say yours is?

Share your experiences by commenting below!

    ***Photo courtesy of http://www.flickr.com/photos/andrewarchy/2527200986/