That is a long term good sign. We needed to cut spending by a lot. It is past time for the American people to stop borrowing and start saving.

It's a tough question.  I have no doubt that on a personal level the lessons of the last year will be forgotten like those of the great depression or 70s gas prices.  But the only thing with a shorter attention span for such things than the individual is the corporation.  They're reluctant to acknowledge today what lower sales may have to do to their profits, stock prices, and executive salaries, so I have even less doubt that they'll be back into promoting consuption at their earliest oppertunity.

The trcik will be how.  The wave of consupmtion was often justified by low unemployment, high investment return, and the unwavering beleif that hard work garuntees success, all of which are in the crapper today.  As lon as we're a people needing to worry about where our next meal comes from or how long our savings will need to last, we're going to horde for ourselves.

And the corporate world may have to accept that it can't have things both ways.

I think there are two general classes of penny pinchers - those that have to pinch pennies becasue their incomes have dropped due to the recession - and those that have undiminished incomes but choose to pinch pennies because their houses are worth less, their 401ks are way down and the gloomy/doomy news on CNN scares the hell out of them, so it seems like the prudent thing to do.  The first group will tend to keep pinching pennies for a long time (years or decades) even if their incomes are restored.  The second group will return to their old lavish ways within a few months of the all-clear signal.

We were doing very well at saving until the breadwinner's hours were cut.

So much for the extra saving. What it means is, we won't afford to do the home improvements to make this 73 year old 'affordable' starter house energy efficient.

However, with a new baby, we are doing our part to help support the economy.

OK, their are two trains of thought here......if we all pucker up and quit spending this recession is in for a long ride.....If the wealthy,quit spending it will become worst. No investment,no innovation,no risk taking and no jobs.

We as a country have been obsessed with having it all for about a generation and a half(maybe two), and we finally got our wake-up call. I'm sure we are eventually going to adjust, but lessons learned?? That's up for grabs.

As investors,we will become more cautious. As savers, hopefully we won't become hoarders. As spenders, we might look for better bargains and maybe live more within our means. And maybe, just maybe this part of history will not repeat itself again, for a long,long time

Hey Ripster,

There is a third class of penny pinchers:  Those who value true financial freedom and base their lifestyle on costing well under half their take-home income.  I have my own home paid for--the relative worth in the market is irrelevent (except to protest an unreasonable property tax assessment) since I am not selling or moving.  Don't give a damn about my retirement accounts--they'll come back.  

My coupon clipping, wash clothes in the bath-tub, set the heat at 55 in the winter ways allowed me to stop working and live quite well on municpal bond investment income.

And I still clip coupons and pick up the penny found in the parking lot.

Grumpy,

You are right - I should have said there are two classes of "nouveau penny pinchers" and another class of penny pinchers who've been frugal all along.  And, while washing one's clothes in the tub sounds like a lot of work, it doesn't look so bad when you consider that you don't have to drag yourself off to a full-time job 5 days a week.

Grumpy, glad things are working out for you, but consider that not everyone has time for their retirement accounts to come back (which ithey won't).  You seem like a parasite on society, only concerned for yourself, and happy because you think you lucked out.  However it is that you earned the money for your house (or maybe your dad died and you inherited it) it was the result of a functioning economy that provided jobs, materials, technology, so don't gloat about doing your wash in the bathtub, I don't think that the $20/month you saved there made all the difference.  You benefit from the economy just like everyone else, you have water, gas, power, you get what you can't grow from the store.  This all comes from other people who participate in the economy.  The income you get from your bonds comes from a functioning economy.  I hope you're not watching TV all day, but rather donating your time and talents to a charity that makes the world a better place.  All your goodies can disappear quite quickly with an earthquake or tornado, or a bout of cancer.  No man stands alone.

Nope. Sorry Kim. The American consumer is, by and large, ignorant of finance. Once this downturn is over Bubba will be back buying useless stuff he doesn't need so he can one-up his neighbor. What is Bubba doing now? Paying down his credit cards so he can run them up again.

To Kdb: Yes, 401k accounts will come back. I only lost 10% last year, and actually came out ahead with company matching. Mine will be back as early as next year. As for what Grumpy does with his time, isn't that his business?

KDB,

You are dead wrong in everything you say.  I worked my ass off, running a business while living the lifestyle of a trappist monk, for all intents and purposes. I inherited nothing as my poor parents had nothing to bequeath beyond their love and guidance.

In 2008, I sold my business at year's end and in 2008, I paid nearly 900,000 dollars in federal income tax, which I suspect is more money than you'll even make in your lifetime, let alone paying your own way.

I don't own (and never have) owned a TV as I have yet to hear of anything worth watching.  I became financially independent precisely because I avoided going into debt and squandering my hard earned money on the trivial and trite things in life.