With the economy starting to settle, Americans may be slipping back into bad spending habits

The latest economic trends of higher consumer spending and healthier stock markets may be pointing to evidence that we are coming out of the recession. In retrospect, the recession did change some people’s bad economic habits, but the resurgence in the economy unfortunately means many people are returning to their old ways of spending.

With the stock market advancing, more people are returning to investing in the market. That is good news for the market but not for personal returns. Most people abandoned investments during the recession, which created the best investment opportunity in our lifetimes. Jumping into the market now that the market is higher simply means that returns will be smaller as there is less room to grow now.

The same is happening with spending. We may be spending more, however prices are not as low as they once were in most cases. Stores and businesses have stopped discounting many items because shoppers are returning.

Yet, the recession has changed some of our habits. Many of us are now appreciating frugality as a permanent part of our lives. Just like in the 1930’s, most Americans became frightened after all the suffering and were permanently changed.

Unfortunately, the ones who remain frugal are the minority, according to investigations by the market research firm Decitica. It found that 20% of Americans remained frugal after a recession. But, 30% return to their previous spending habits. This research indicates that most Americans do not change much after a recession and are likely to end up where they once were.

Budgeting and coming up with a good financial plan of action when money is tight is a valuable practice to get into. This involves building and preserving an emergency fund to cover expenses during financial disasters such job losses. Another smart move might be to save money for purchases when the stock market and prices are going down. A good financial planner can present varying situations to help individuals draw up some sort of potential plan.

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