A new trend: Pay as You Go

Here’s a front page story from today’s New York Times:

Economy Fitful, Americans Start to Pay as They Go

“For more than half a century, Americans have proved staggeringly resourceful at finding new ways to spend money.

In the 1950s and ’60s, as credit cards grew in popularity, many began dining out when the mood struck or buying new television sets on the installment plan rather than waiting for payday. By the 1980s, millions of Americans were entrusting their savings to the booming stock market, using the winnings to spend in excess of their income. Millions more exuberantly borrowed against the value of their homes.

But now the freewheeling days of credit and risk may have run their course – at least for a while and perhaps much longer – as a period of involuntary thrift unfolds in many households. With the number of jobs shrinking, housing prices falling and debt levels swelling, the same nation that pioneered the no-money-down mortgage suddenly confronts an unfamiliar imperative: more Americans must live within their means.

“We don’t use our credit cards anymore,” said Lisa Merhaut, a professional at a telecommunications company who lives in Leesburg, Va., and whose family last year ran up credit card debt it could not handle.

Today, Ms. Merhaut, 44, manages her money the way her father did. Despite a household income reaching six figures, she uses cash for every purchase. “What we have is what we have,” Ms. Merhaut said. “We have to rely on the money that we’re bringing in.”

The shift under way feels to some analysts like a cultural inflection point, one with huge implications for an economy driven overwhelmingly by consumer spending.

Credit counselors are now swamped by calls not just from people of modest means, but from professionals earning six-figure incomes, their access to finance warping their distinction between necessity and desire.

“The longer someone has lived on a high income, the harder it is for someone to cut back,” said Manuel Navarro of Money Management International in San Diego. “I ask them, ‘Do you really need to have a 60-inch flat-screen TV hanging on your wall?’ ”

Substitute Americans with Filipinos and you have a picture of what’s happening to so many of us now. We are a consumption-driven society, where appearance and perception is often mistaken for reality.   Come on and admit it…   are credit card companies are making a fortune out to you?  🙂   

I’m still putting together my financial resolutions for 2008.  One of them is to Pay in Cash, or As Good as Cash (don’t wait for the bill — pay credit cards online on a weekly basis).

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Motherhood has a very humanizing effect. Everything gets reduced to essentials. ~Meryl Streep

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