Pimp Your Finances

If you really want to see how people are affected by the economy -  look at what they’re buying. Don’t listen to what the media says. After all, they missed the lead up to the crash, so I’m naturally skeptic when it comes to their coverage of the fallout.

Time Magazine recently got it right it right though, and that’s because they asked the Nielsen Company (famous for TV ratings) what people are buying in stores like Wal-Mart and Target. Rather than interpreting the data, they let the numbers speak for themselves.

Here’s a summary of their findings:

Increasing categories:

• Seasonal general merchandise – up 32% (includes thawing salt, body warmers, gift packages, and candy)
• Canning, freezing, and food prep supplies – up 11.5%
• Family planning – up 10.2%
• Fresh meat – up 7.3%
• Vegetables and grains – up 5.5%
• Pasta – up 4.4%
• Cheese – up 1.1%
• Wine and liquor – up, but no numbers given
• Baking supplies/mixes – up, but no numbers given

It seems like people are just cooking at home more in general, and are also downgrading their gift purchases. The “seasonal general merchandise” category includes things like holiday gift sets, so it seems like people may be skipping out on the flowers and jewelery for something a little more economical.

Decreasing categories

• Film and cameras – down 31.5%
• Sports and novelty cards – down 26.5%
• Magazines – down 17.1%
• Canned seafood – down 13.3%
• Jams, jellies, and spreads (including peanut butter) – down 12.1%
• Bottled water – down 11%
• Cookies and ice cream cones – down 9.7%
• Home accessories (includes kitchen gadgets, lawn and garden items, buckets, bins, and bath accessories) – down, but no numbers given
• Air fresheners and deodorizers – down, but no numbers given
• Insect repellent – down, but no numbers given
• Flu and cold remedies – down, but no numbers given

It’s pretty easy to cut non-necessities in a pinch.

It’s worth noting that the jams, jellies, and spreads category is skewed because of the various salmonella scares that have occurred recently. Otherwise I’m sure this one would be up.

I was surprised that canned seafood is down so much. Canned tuna is one of the cheapest (and healthiest) meal bases you can buy. I thought this one would’ve been on the increase, especially because fresh meat sales are up.

What it says about income

The authors also had some interesting takeaways. First, they said that the trend applies to all income levels.

People think they have to hunker down, no matter what their socioeconomic status.

I find that surprising, but encouraging. Hopefully people of all incomes are realizing the importance of having a solid financial base, including spending more responsibly. Not necessarily spending less, but more responsibly.

What it says about long term habits

Another conclusion they reached (that I disagree with), is that:

What’s more, experts say… lagging products shouldn’t expect a rebound anytime soon. The back-to-basics movement is here to stay.

I don’t agree with this. I think that people will change their habits as long as they feel the pressure, but once things are back to normal and they’re not worried about their job, they’ll return to their old ways.

If there’s any change, it might be that consumers build a bigger emergency fund, but nothing else will be different. People have a short memory, and history tends to repeat itself.

If we learn from our mistakes, why wasn’t there a sustained push for energy independence after the oil shortages of the 70s? Why did the dot com bubble of the 2000’s lead right into a real estate bubble?

I think it’s great that people are acting more responsible now, but I don’t think it means that the changes are permanent by any means. For a more detailed discussion about why I feel that way, check out my post on Consumers Cut Back, but Have they Changed Their Ways?