From Discretionary Spending to Discretionary Thrift

by Ron Haynes

Discretionary spending is defined as “The amount or portion of a person’s expenditures  used for spending on non-essential items; the portion of one’s expenditures which one may make as one sees fit.” It’s the amount that we have available to spend after we pay taxes, purchase food, buy clothing, and make arrangements for shelter. Since 1985, consumer discretionary spending has steadily increased at a 3.4 percent real rate (adjusted for inflation).

Today, in the midst of a global economic slowdown, many consumers have no choice but to become thrifty and frugal. There simply is no discretionary income to spend on discretionary items. But others, who still have discretionary income, are making conscious decisions to find a balance between frugality and spending.

Discretionary Thrift

This discretionary thrift is a relatively new trend amongst consumers and possibly signals that many are tired of the excessive consumption that dominated our lives over the last 25 years. People are setting up their emergency fund, recycling, buying used goods, teaching traditional values and skills to their children, and learning to handle their finances more like their great-grandparents rather then their parents. They’re making a budget, clipping coupons, comparison shopping, planting gardens, brown-bagging lunches, cooking at home more often, and even planning more frugal birthday parties, weddings, and vacations.

Find yourself in this same boat? Many people don’t like to admit their frugality. Somehow it seems boring and a bit old fashioned. However, the current recession has made discretionary thrift and frugality much more acceptable. Witness the increase in blogs dedicated to personal finance, simplicity, making things at home, and teaching people how to make extra money.

Mercurial Consumption

Another part of this new discretionary thrift is what economists call Mercurial Consumption. During the pre-recession boom, I personally found myself much more skilled at finding alternatives to my preferred brands because of the information I was able to find on the Internet. These different products or services met my needs as well or better as my former choices and many times they were cheaper! As a result, companies are finding that consumers like me will quickly abandon any choices that fall short of expectations. If a product is only 10 percent better but costs twice as much, I will quickly make the switch!

What you and I buy may change and evolve when the economy recovers, but what won’t change is our ability to find options, nor will our willingness to switch to another brand if it still meets our needs.

The Bottom Line

Those with money aren’t spending it like there’s no tomorrow anymore. Even when the economy DOES recover, there’s a pretty good chance that we won’t start down that path again either. Couple that with our dissolving allegiance to branded items which don’t meet our expectations and you have a recipe for disaster for the cheap junk that’s been foisted on us by retailers and manufacturers during the last few years. The potential result? Better products, higher quality, greater service, and fatter savings accounts.

Sounds like a silver lining to me!

About the author

Ron Haynes has written 1001 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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{ 5 comments }

Mark W.

My hope is that all of us emerge from this global economic slowdown more self-sufficient and realize the limitations of our government to solve (all) our problems. BTW I like this post and your optimistic perspective on our eventual economic recovery.

Vicky

Like many, I have radically changed my saving and spending habits. I was sleepwalking through my life before in terms of thoughtless spending and a casual attitude about saving. These new habits transport me back to when I was just out of college and had very little money–but when life felt more adventurous and simple.

I am lucky because I have more than enough salary for one person and can save. Not having enough is not romantic — but feeling in control and proactive is invigorating. The simplifying of things that comes with not buying stuff is exhilarating.

Blogs like this one keep me going.
Thanks for sharing.

marci

My spending hasn’t changed one iota during this “slow-down”, (except to take advantage of some great bargains) nor do I expect it to change once it’s ‘over.’…..

But then I’ve always been a frugal do-it-myself kind of person and expect to continue to be so.

Al

Good post, reminds me of something I would read in Harvard Business Review

Ron

Thanks. Discretionary thrift is a relatively new term but I’ve heard it quite often lately on cable news shows, private and public blogger forums, talk radio and other media. I thought about using the term “optional frugality” but it didn’t have that same ring to it. “Frugality” has gotten a little tiresome so I started using “thrift” instead. It’s especially useful and understandable when used as a distinction with spending.

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