Three Creative Responses to a Shrinking Economy

first_imgBy Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, oneill@aesop.rutgers.eduMany military families and the professionals who serve them have found themselves living on less real (after inflation) income in recent years. At the same time, household expenses such as rent, food, and out-of-pocket health care costs, have continued to rise. In addition, much has been written about shrinking economies in countries such as Greece and Japan and the decreasing middle class population in the United States.When economies shrink or income levels get smaller, spending generally decreases. People lose jobs or their wages decrease or remain stagnant. This, in turn, results in household spending cutbacks. People buy less, eat out less, buy less expensive items, and look for other ways to economize.The “official” measurement of economic growth (or lack thereof) is the gross domestic product or GDP, which is calculated on an annual and quarterly basis. Used officially since 1944, GDP measures the monetary value of goods and services produced within a country. It is tracked over time to measure economic growth or decline and to determine if a recession is occurring. For example, a government report might say “GDP grew by 2.4% in 2015.”There are also informal ways to measure economic growth, including studying current retailing trends and stories about individual and household responses to a shrinking economy. These, too, provide valuable insights into spending habits. At the 2016 meeting of the Family Economics/Resource Management Association (FERMA), the following three strategies that U.S. consumers have adopted to live in a shrinking economy were described:FreeganismAt the FERMA conference, freeganism was loosely defined as the practice of reclaiming food and other items (e.g., clothing, home furnishings, etc.) that have been discarded. This movement originally started in the 1960s with discarded food and is a mash of the words “free” and “vegan.” Not only does freeganism save people money, but it is environmentally friendly and keeps usable items out of landfills. The Youtube video, Freeganism: Living Off Trash, explains the basic tenants of freeganism: https://www.youtube.com/watch?v=yCyPv0j4bPw.The description of the video states They live for free. They eat for free. Or as close to free as they can manage. They’re more than frugal; they’re freegans. With recession woes inspiring more people to look for meaning outside the mall, freeganism is gaining ground. Methods used by freegans to obtain items at no cost include taking items set outside by others for trash pick-up, pulling items out of trash receptacles (a.k.a, “dumpster diving”), re-using family hand-me-down items, and participating in community Freecycle Network programs where people donate and receive items for free in their local community (see https://www.freecycle.org/).Tiny HousesPhoto by Jon Callas. CC BY 2.0The tiny house movement has been profiled on several reality television shows. Instead of buying a typical home that averages around 2,600 square feet, people choose to live a simpler lifestyle with fewer possessions in homes that measure 100 to 500 square feet. Home purchase costs are reduced and so are costs for utilities, property taxes, and maintenance. Obviously, living and storage space are greatly reduced also, which may require downsizing. The 30-Day Downsizing Challenge is one strategy to do this. You start by donating or gifting one item on Day 1, two items on Day 2, three items on Day 3, etc. By the end of Day 30, you will have removed 465 items from your possession.MinimalismMinimalism is just what the name implies: the practice of simple, frugal living with fewer material items and less clutter. Some have even suggested a maximum number of personal possessions, such as 100 or 200 items. For clips from a 2016 documentary film about minimalism, see http://www.theminimalists.com/five-clips/. For an article that explains the concept, see http://www.theatlantic.com/business/archive/2014/07/living-with-less/374544/.last_img

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