Save Money by Going Back in Time

Here's a very interesting (and fun!) piece from MoneyCentral titled save big with the flashback budget. Their idea is that we should go back to the 1970's (totally new territory for some of you reading this, but I remember them well) and adjust our spending accordingly. I'll get to a few specifics in a moment, but I want first to highlight their list of the percent of Americans who say the following are necessities these days:

• Car - 91%
• Clothes washer - 90%
• Clothes dryer - 83%
• Home air conditioning - 70%
• Microwave - 68%
• TV set - 64%
• Car air conditioning - 59%
• Home computer - 51%
• Cell phone - 49%
• Dishwasher - 35%
• Cable/satellite TV - 33%
• High-speed Internet - 29%
• Flat-screen TV - 5%
• iPod - 3%

Other than the car (and you could argue that one if you live in a big city), I'm not sure any of these are necessities. They certainly make life much more convenient, but are they necessary? Can people live without a microwave? Yes, they can. It's much more difficult, but people can survive without one. Which is exactly the point of this article: our list of "needs" has increased significantly over the past 30 years.

So, what did MoneyCentral find about what we did in the '70's versus what's going on today? Here's a short list:

We were living small. The average new home in 1970 took up less than 1,500 square feet. Today, new homes average more than 2,400 square feet, and there are fewer people living in them (about one person fewer, compared with the 1970s).

We drove smaller, too. At the start of the 1970s, only 31% of households had more than one car, according to the U.S. Census Bureau; more than a quarter had no vehicles at all. By 1995, 60% of households had more than one car and only 8% were carless.

We ate at home. Food in general used to take up a lot more of our budgets. Food costs declined from 20.2% of the average family's expenditures in 1960 to 16.3% in 1972 to 12.8% in 2005. But even as food costs have dropped, the portion of our budgets we spend on eating out has grown considerably.

Basically, we've simply expanded our lifestyles. We have bigger homes, more cars, eat out more often, take nicer vacations and on and on. Is it any wonder that some of the best financial advice today is spend less than you earn? In the 1970's, people would have said "duh!" to such advice. Today they say, "Hmmmm. That's an interesting idea."

Now don't get me wrong. I'm not saying: 1) That we should return to the 70's ways of doing things (heaven forbid!), 2) that it's not right to enjoy yourself a bit and spend on the comforts of life, and 3) that I myself don't have any of the items listed above (in fact, I have most of them.) But what I am saying is that we all need a bit more restraint when it comes to spending and what we consider "must-haves." With just a touch of discipline here and there, I'm convinced that many of the people in financial difficulty would be doing fine if not even thriving. But until they can see their way past the belief that an iPod is a necessity, they're doomed to a rough financial life.

Comments

[Edmund]

I find the idea that it takes money to enjoy life offensive.

That statement somehow implies that I need to have money to enjoy life. Sure, there are plenty of things, including necessities, that require money. I believe that once you have a certain amount of income, you should not need much more to be able to "enjoy life".

[cami]

I actually know someone who refuses to own a microwave because she thinks that they are bad for your health. Yes, it is possible to function without one. As far as cell phones go if you're single and you only have one phone, then I don't think it's much different than having one house phone back then. Did most people have house phones in the 1970's?

[dezza]

after moving to hong kong, i do not have a microwave and instead steam any leftovers and vegetables in a wok. if you don't have a wok, a steamer would do just fine as well.

many people in hong kong only have a mobile phone and no home line. the only reason i have a home phone line is because it came free with my broadband internet access.

interesting article!

[Wealth Building Lessons]

The more you expand your lifestyle, the more you're a slave to you job and the more you become dependent on it. If financial freedom is what people are looking for, they should free themselves of material desires.

[Anitra]

I grew up in the 80s and 90s without most of these things. We never had a dishwasher or cable/satellite TV. We got our first TV in 1985 and used it as the "primary" TV for over 15 years. Our first microwave didn't appear until 1998, and we used a dial-up modem for our Internet access from 1993 onward. (We did have 2 cars, a computer, and a clothes washer & dryer - but even then, the mantra was "fix it, don't replace it".)

When I compare with what my husband and I have now, I wonder why we feel so many things are necessary. I admit that our jobs as computer programmers would be harder if we couldn't check our email from home over our high-speed internet connection... but do we really need that large LCD TV and digital cable?

[Steve]

The challenge is... if everyone does that, the word recession will be spoken about quite often! In fact, we would all experience it again.

[cami]

Very true Steve, that's a large part of the problem with a consumer economy IMO. So many people have to buy things that they don't need, so that other people can have jobs to buy things that they do need. I find that a little bit scary.