How the Crisis Is Changing You

Frugality and safety are in; bling and plastic are out. The economic meltdown has sparked a major shift in our financial values. And one that's likely to last.

A new set of American values is emerging from the ashes of 600,000 layoffs a month, a lost decade in stocks, and the worst housing crash ever. These values may ring familiar to anyone who lived through the Great Depression. But for most of us it amounts to a large-scale makeover of the way we think about money and life.

We're not just cutting our bills, we're rejecting materialism. We're placing safety and intrinsic rewards like relationships and personal growth ahead of profit. We're embracing family and community and asking how we can help others, not just ourselves.

"We've hit a hard pendulum swing," says Douglas Brinkley, a professor of history at Rice University in Houston. And he, along with many others, believes the changes in the nation's core values could last for decades.

What does this pendulum swing look like? First, we have a sweeping new attitude about how to shepherd and deploy our assets.

In an exclusive nationwide survey conducted for this magazine earlier this year by Marketing & Research Resources, nine of 10 respondents said they have changed the way they manage their money as a result of the economic crisis; seven of 10 said their priorities are shifting as well; and a whopping 94% said the recession will have a lasting impact on the way they handle their finances.

The über-rich, we know, are doing fine. But everyone else -- including, and perhaps especially, the mass affluent -- has been touched in a visceral way. In the poll, only 36% of those who earned at least $75,000 said they were optimistic about the economy -- vs. 44% of those who earn less.

The new values transcend money. Nearly 10% said they were giving more time to charities. More than half said they now feel plain guilty buying things they don't need. Seven in 10 said they consider spending time with family more important than ever.

Collectively, the poll data suggest that Americans are recalibrating the worth of everything, from their job and investments to their family relationships and what really makes them happy.

Perhaps most interesting: The shift appears to be driven, at least in part, by a sense that the economic crisis is a long overdue catharsis; it's the jolt we needed to reverse a multitude of bad financial habits and destructive attitudes developed over many years.

Live within your means? That makes sense. Say no to your child's latest ringtone download, and explain why? That's actually good for him. Treat your home equity like a long-term investment, not a cash account? Hey, you might even be able to retire one day.

Not all of the lessons we're suddenly taking to heart will stay with us. Wharton marketing professor David Reibstein likens the new thrift to soul-searching after the terrorist attacks of 2001, when it seemed air travel would never recover. Of course, it did -- and fairly quickly. Yet historians like Brinkley believe enough people have felt enough of a sting in this downturn that our core values around money could look different well beyond the recovery.

Note: Money's online survey of 1,227 Americans ages 18 and older (half with household income of $75,000 or more) was conducted March 2-5 by marketing & research resources. The margin of error is plus or minus 3.95 percentage points.

What's Different Now

Debt is out. In recent years, everybody seemed to have everything he wanted (or, maybe, everybody except you).

It turns out, though, that the neighbors' fancy vacation was paid for with a home-equity loan. Your friend's Manolo Blahniks were on her credit card -- and probably still are. Your colleague's McMansion came via a no-doc, negative-amortization mortgage -- and is now further underwater than Davy Jones's locker. Debt, debt, more debt -- and, assuming those Blahniks are worn out by now, nothing to show for it but a few snapshots and loads of stress.

We're starting to take the goal of getting out of debt, and staying out of debt, seriously. Nearly 70% of our survey respondents reported that if they can't pay for a purchase with cash or a debit card, they don't buy. About three-quarters said increasing the amount they save is more important now.

And after years of paying lip service to this notion, Americans actually are socking more money away. The national savings rate, which was negative just a few years ago, shot to a 14-year high of 5% in January.

Michael and Paula Parish offer a glimpse of this trend. The couple from San Jose, both 41, have begun packing their lunches each day. They have stopped all impulse shopping online and sworn off credit cards. In the past year they managed to cut their revolving debt in half -- to $15,000.

No one had a gun to their heads. Paula still has her part-time job as a client-services manager in the financial industry, and while Michael lost his high-tech job a year ago, he makes just as much now as an IT consultant. Still, "we feel a lot poorer," says Paula. "We are determined to do away with debt entirely -- and for good."

Bling is bad. Even if you can afford nice things, it's no longer cool to flaunt them. Consumers have gone underground. Retail sales fell 8% in the fourth quarter of 2008.

"Ethically, it doesn't feel right to be looking at $1,000 boots and purses," says Gemma Allen, a Chicago lawyer. She and her friends used to gather for regular shopping trips to Barneys and Saks; now they meet for coffee. In a recent MetLife survey, nearly half said they already had all the possessions they need, up from 34% in 2006.

The new status symbol these days, trend watchers note, is owning (not leasing) a car that is more than three years old, which helps explain why the sale of certified pre-owned vehicles rose 1% last year while overall auto sales plunged 18%.

"All of my clients have reduced their spending -- not just out of necessity but because it provides a sense of control in their life," says Stacy Francis, president of Francis Financial in New York City. "We can't control the stock market or whether we're laid off. But we can decide when to close our wallets."

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