Our Economy: Changing savings habits

GREEN BAY - Eight months ago in the midst of rising unemployment and a credit crisis the "financial fire drill" was sounded. Some residents in Northeast Wisconsin were determined to change their spending habits and prepare financially for the future.

"We're going to go back and look at what are our wants and what are our needs and we have to get rid of our wants," said Linda McKeag of Allouez back in March.

At the time McKeag was determined to get her finances in order and build up a six month emergency fund. She cut out using credit cards, vowed to get rid of her cell phone and even contemplated saying no to cable TV.

"I know if I've got it all planned out, I'll have less surprises down the road," she told us in March.

Today, those surprises are few, she says, because she has stuck with her financial plan and changed her life.

"It has changed in the fact that sometimes when you make certain cuts you're limiting yourself, restricting yourself and that isn't really what has happened," said McKeag.

She now monitors all of her spending through the envelope system, allocating cash each month for everything from food, to gas, to clothing.

"I kind of know what we have and I work within it, and it just makes it easier, in my mind it does," McKeag said.

Shari Martzahl of Menasha also revamped her spending habits earlier this year. She was burdened though with working to eliminate $12,000 in debt built up by using credit cards.

"You don't feel it, you don't feel that you're spending money," explained Martzahl back in April.

Martzahl was making progress at first but admits to stumbling a bit.

She declined an on-camera follow up but told us through email, "My progress has been very slow. I've struggled in the past 6 months to hold onto my house."

Economics professor Kevin Quinn believes financial awareness has eased a bit for some, but it remains a big part of our lives.

"The mentality is not so much the crisis-slash-siege it was a year ago, but I think replacing that is a more sober attitude toward our family budgets, and probably a more realistic one too, actually," said Quinn.

A MetLife study on the effects of our current recession found 65 percent of those polled plan to reduce spending on non-essential purchases. From the same study 55 percent believe our change in spending habits will have a lasting impact of 10 years or more.

Those spending habits will be put to the test in the next month or so with the holiday shopping season getting into full swing. The fourth quarter of the year is traditionally when most of our retail dollars are spent.

Last year retailers took a big hit, year to year holiday sales dropped for the first time on record, down three and a half percent. This year sales are projected to drop 1 percent totaling around $438 billion. Major stores are also projecting flat sales, understanding spending habits have indeed changed.

"The department stores they are dying, if you look at the discounters like Walmart, they're actually doing pretty well. People are trading down in what they're shopping for," said Quinn.

A recent poll on holiday spending found consumers holding on tight to their money this year, expecting to spend on average $683 this year. That's compared to $705 last December.

Linda McKeag admits she makes wiser choices to save money. She doesn't yet have a six month emergency fund saved, but she's getting closer. And she's been able to make some concessions, like keeping the cable.

"Okay, there are some things that I discovered if you want to have a happy marriage you simply don't touch and that's one of them in our marriage," said McKeag.

Needs rather than wants are the focus of holiday gift giving this year. More than half of all respondents to a national survey were hoping to get gift cards this year, suggesting the one thing more people could use is money, to buy what they need most.