(Editor's note: Prayer ask, please. I received a call from my cousin today. My aunt (my mother's brother's life) went to the hospital yesterday for jaundice. They diagnosed her today with Pancreatic cancer, stage unknown at this point. Prayers and good thoughts for Pat would be deeply appreciated.)
As I continued to sit and think about the cost of how much I spent to feed myself, it ran in some interesting questions. In fact, in made me realize how little I tend to buy at all at this point.
For example, clothing. I likely have enough clothes to last me the rest of my life - for almost every situation. Other than those things that tend to wear - socks, underwear, even jeans - the only sorts of clothes I would buy are those sorts of things that tickle my fancy (vests and vintage Japanese kimonos fall into this category).
Books? I am always up for another book, but in point of fact I am always up for another book. Can I make a solid case for needing another? Errr.....
The rest of the things I might purchase fall into the category of occasional needs: the unfun things of life like household cleaners or an oil change or new tires or pet food (and a surprising amount of pet snacks) - at some level things I must have to accomplish a task.
A reduced income helps with all of this prioritization of course, both in determining what can truly be afforded as well as making a sincere effort to extend whatever one has to the maximum extent possible.
For myself of course, there is little "concern": I am perfectly happy living this relatively simple version of reality. But what, I wondered, are the economic impacts of such a lifestyle. What would the impact of hundreds of thousands or even millions living this sort of lifestyle be on the economy?
The best figure I could find at the time of this was that 80.2% of the US Labor force is in Services and 18% are in Manufacturing (Thanks, Wikipedia). I am not quite sure what that actually breaks down to in real life, but the old saw of 70% of the American public working in retail or services may not be too far off the mark. So what happens if the American public seized up on their spending?
We have seen an example of this in the past, of course: The Plague and its results. I do not have a lot hard data on the total loss of jobs and industries (it seems a bit hard to locate on a quick search, oddly), but colloquially we all know of people who lost their jobs or even their businesses. In that case it was because of government mandates; what would it look like if it was a voluntary action?
I have no idea, of course - but I can imagine. Businesses would close - those that were totally discretionary in nature first (restaurants and entertainment venues come to mind here), with escalations from there based on need: most need a haircut at some point and places that supply basic parts or materials like auto parts stores, grocery stores, or farm supply will likely be higher up on the list than designer clothes stores (or malls in general). And likely the government at some point would get involved as well - after all, those tax dollars do not generate themselves. I can see our political critters as well as "key influencers" out there telling us that spending money is the patriotic thing to do.
Is it? I am not sure. I suppose it depends on the definition of that sort of "patriotism"; to me more and more, it seems much closer to home.
Another really interesting post, TB. You use the Plague as an example, but I'm guessing inflation is now the reality knocking at the door for a lot of folks nowadays.
ReplyDeleteOur experience is the same as yours. As income decreases, spending analysis increases. It rather forces one to prioritize, although I've known folks who put it all on the credit card (even paying monthly bills) because surely things will get better or else they can just declare bankruptcy and start with a clean slate.
But, you're speaking of a voluntary decrease on the part of people. I know for Dan and me, decreased quality of goods has caused us to stop buying certain items because we can't afford to replace them every 6 to 12 months. We have to explore alternatives and sometimes do without. I feel fortunate that our decline in income was gradual over several years as it gave us (me especially) time to adjust.
Leigh - Agreed that it is completely inflation related at this point. It now appears The Plague was really just a dress rehearsal.
DeleteI will be fair that we use a credit card for paying for many things (due to the earning of points for rewards that pay for things like flights), although we pay it off at the end of the month so it functions just like cash. But given the rates of credit cards these days - I think one of ours is at 20.99% if we do not pay off the monthly balance - I cannot imagine using one as a "credit card", as we did once upon a time. I also imagine in the scenario you describe banks will at some point push to limit bankruptcy or simply stop issuing credit cards.
I did not touch on the decreased quality of goods, but you are precisely right that this is also a cause for stopping to buy things. Silly but pertinent example: I am at the point where I begrudge buying any sort of shoe that I cannot maintain for years (e.g., leather shoes with replaceable heals and soles). Yes, I pay more once - but I can likely use what I have for the rest of my life with care at this point. Whereas when I buy sports shoes, I am inevitably looking for the cheapest version available because they will wear out and cannot be fixed.
Like you, I have come to view our current decline in income as a blessing, not a curse, as it has made us look more carefully at our spending. Even if we are fortunate enough to see another increase, we will handle it very differently.
Coincidentally, I touched on this very subject recently on a forum that I read. Someone mentioned that we should be focusing on increasing income over saving and investing as a way to build wealth more rapidly and asking why the focus is always on saving and investing. While I feel that saving and investing are much easier and involve less risk than increasing income which involves a lot of risk, I felt that the fastest way to increase wealth is to decrease consumerism. All around me, I see people buying hugely expensive things like houses and vehicles that are way more than needed, just to fit in to society. It also touches every single one of us. You have your kimonos and I have my wood working tools. If we just all learned to consume less and be happy with what we have, I think we would all be very wealthy, albeit the economy would be trashed as you correctly pointed out. So in the end, I hope there are only a few of us who realize this and reap the rewards.
ReplyDeleteEd - Interesting that this was thing that came up for you as well.
DeleteSpeaking as someone who has been on both the increasing and decreasing income sides, the major difficult with increasing income is that it is not under our control. Yes, one could do things like invest in revenue returning items or seek a second job but those always come with costs: the rental that the expenses suddenly go through the roof or government regulations that make it harder to manage the property or the hours that one loses when one works two or more jobs. But there are very few places where one can make the market or one's employer "give" more money.
To your point, simplification (and saving and investing the difference) are much more in our control. Every dollar I do not spend is a dollar that is mine free and clear. And I 100% control my ability to monitor my spending.
A timely example: This weekend there is a festival in town that I was interested in going to. As I thought it through today and starting adding up the expenses of going - transportation, admission, undoubtedly buying food there as well as some other things - I suddenly realize that I could easily drop $40 to $50 for 2 or 3 hours (plus transport time). Or, I could stay here and reallocate those funds to other things (to be fair, most likely a veterinary visit for Joy the rabbit, but the principle remains).
Expensive houses or cars? My plan is to drive this car until it dies and then drive my parent' car that we had let my daughter use until it dies. I honestly feel I can almost get by on those two cars until I can no longer drive (The Ravishing Mrs. TB has a better car of course, but again the principle of "drive until it dies" remains). And a house? Maybe at some point something small in New Home 2.0, but even then it will be something we would likely keep and really just intended for the two of us.
To be honest, I think I would welcome the economy where the individuals are happy with what they have and supporting the things that they need and consumerism as a whole would simply fade away as unsustainable.
Even before status changed from "employed" to "retired" spending underwent a thorough examination though having the home mortgage paid off last year helped a bit...... :) However having street reconstruction done in the neighborhood for the last three months means a "special assessment"........ :( The only items that I've increased consumption on are lead, steel and brass......:)
ReplyDeleteNylon12 - We are starting this activity now, although we still have a number of "loose ends" to tie up (and by loose ends, I mean children in college). We have the example of both our parents and how they changed their spending upon retirement. In general, they spent far less and benefitted from having a paid off house (although to your point, you cannot control the special assessments and random taxes).
DeleteChanging my living space has helped with this too: there is simply less space for the stuff. It is harder to justify buying more when there is really no-where to put it.
As most of us are aware the rosy numbers of inflation (under control) and more jobs gets quietly REVISED harshly a little more than a week later on page 12 of Barrons and such.
ReplyDeleteMost of the "Job Growth" seems to be jobs for illegals from several sources including indirectly Government Accounting Office".
Cheaper labor for chicken processing with subsidized housing and EBT assistance has been observed and memory holed by the media.
AKA Gov.com made up jobs paid with American debt issuances.
I fear Weimar Germany level hyperinflation as throwing more debt bucks at things has been their MO for decades.
Sadly, they can "Print Money" for the EBT cards, but they cannot "Print" a single loaf of bread to buy with it.
Going to get "Interesting" when a money filled EBT card doesn't buy much.
I was a young man in the 70's when odd even gas lines and the sad joke was "You can pay for your rent, electricity, food and medicine, PICK 2" and "What brand of cat food was best with rice".
Volkner did the harsh treatment allowing some suffering with high loan interest rates. I had briefly a Certificate of Deposit for 17%.
17%... Ponder that a moment. Still have it framed above this computer along with my framed collection of worthless fiat money. Including a real 10 million mark bill (they "saved money" back then by printing only ONE Side of the bill...).
I fear hyperinflation-political repression to maintain POWER-generating discord between groups to keep POWER and shift BLAME to other folks and eventually social chaos and collapse.
My defining moment for SHTF is when EMS and the power crews cannot go out to do their duties without armed escorts. Not a cop in the car escort. ARMED Escorts.
Got trusted friends and trusted family nearby to circle the wagon with?
Your lentils and bulgar might be high living soon enough. BTW how much Cooking Oil is used?
Cooking oil a high value item in most 3rd world countries.
Lots of precious metals Pb and brass are nice but hunger, bad water and ability to keep shelter repaired has been the daily struggle when I was working in Bosnia during the civil war.
Praying for wisdom.
Michael - For some reason unknown to me, Blogger periodically just drops people into spam. Do not take it personally - it even drops my comments into spam from time to time for no particular reason. It is incredibly random as well - yours it dropped immediately; others it drops in months after they were made.
DeleteI have come to completely disregard any job report at this point, as most of them are quietly pushed down months after the initial hullaballoo. The number I most pay attention to at the moment is the National Debt and our ever increasing payments on it. I note this morning I read an article on the IRS planning to up enforcement of gambling related taxes to the tune of $1.4 Billion a year; some wag pointed out this would cover less than 1 month's worth of payment on the national debt.
I vaguely remember the gas lines of the 1970's. Having been in real estate at one point, I do recall reading the interest rate charts back to the late 1970's. At one point I believe the going rate for a loan was 18%.
A saying attributed to the Spartans is that they trained hard so they would bleed less in actual war. In that sense I view this changing of how I live as a form of training hard now to be unsurprised later.
As to cooking oil, it is mostly olive oil. I do not use any for either the lentils or the bulgur, just boiling them straight. In general, we only use olive oil anymore.
Praying for your aunt, TB.
ReplyDeleteYou all be safe and God bless.
Thank you Linda.
DeletePrayed for your Aunt Pat, TB.
ReplyDeleteThis post reminds me of President Bush (W) telling Americans to shop after 9/11. He, obviously, said more than that, but that's the only thing I actually remember of what he said. I recall it was said in the spirit of showing that we would not be cowed by terrorists, to not let our way of living be changed by the tragedy of 9/11. It carried a flavor of it being our patriotic duty. It didn't sit right with me, but at the same time, it rang true-ish. I get it. Because a dollar spent is taxed on both ends of it, the government benefits if we are persuaded to shop and spend money. And we should care that businesses are successful and profitable. But somehow I can't square all that with the fact that I'm personally better off the less I spend. (Insert head-scratching emoji here.)
Thank you Becki. I went by and saw her this weekend - she was in good spirits.
DeleteNow that you mention it, I do remember that. And while I, like you, understand the intent, it came across in the same vein: it is not my "job" to spend or ensure companies remain in business per se, but rather my job to make the best economic choices for my family. Spending excessive amounts of money is not one of those choices.