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After A Long Recession, Over-Spending May Be Tempting

After A Long Recession, Over-Spending May Be Tempting, But Consumers Beware

The desires of the American consumer have changed over the last few years. This concept is not difficult to imagine since the United States has suffered it’s worst economic downturn since the Great Depression. People have been forced to appropriately distinguish the difference between needs and wants.

Prior to the recession, the American consumer was living an unsustainable lifestyle while real estate prices were escalating. People were spending money as if they had their own personal printing press. In reality they did, it was called a home equity line of credit. Excess access to money created an irrational consumer, one who boasted of the ability to customize goods, cars, clothes, jewelry, etc. Consumers got to the point where they became addicted to the process of buying something new, just because they could.

Today, most people feel the opposite; they have a new respect for money and they feel that less can be more and that frugality is the new chic. Perhaps a near-death experience, economically speaking, is just what the consumer needed in order to fully respect the tremendous responsibility of proper money management.

Unfortunately, many people have a short-term memory. They will quickly forget their valuable lessons as the economic landscape slowly improves. They will feel they sacrificed when they had to, but now that things are economically improving, they will feel they can reward themselves. As wrong as this rationale is, millions of consumers will have a sense of entitlement as we enter this holiday season.

Target, the nation’s second-largest retail chain, told the Financial Times recently that it predicts this holiday season should be its best in three years. Target bases its prediction on the enormous pent-up demand of the consumer.

Consumer spending of course is a double-edged sword. On one hand, you want consumers to spend; they represent 66 percent of the nation’s GDP. On the other hand, you want Americans to save more because it creates more economic stability.

This holiday season will be interesting to follow. My hope is that the consumer spends prudently and does not fall back into the same spending trap as before.