Money Psychology

Welcome to the Post Consumerism Era: Will You Make the Turn?

A bend in the road is not the end of the road . . . unless you fail to make the turn.
~ Author Unknown

Like a bend in the road, change can be painful, or it can offer tremendous opportunities. It all depends on a few variables:

  • What kind of shape is our vehicle in heading into the turn?
  • How fast are we driving?
  • How we perceive the bend: Is it something that has caught us off-guard, or are we prepared to slow down and navigate the turn safely? Do we feel like a victim of the change, or are we confident it’s a challenge we can meet?
  • How we react to the change: Will we adapt to it or miss the turn, crash and burn?

Friday’s book review on Consumed: Rethinking Business in the Era of Mindful Spending pointed out some of the emerging changes in consumer habits and postulated that this evolution is not a temporary fad, but a slowly evolving new normal. (You can win a free copy of the book if you submit a comment on the review before Saturday, September 18, 2010.) The book looked at the ways in which these changes will affect the marketing practices of every business.

But what do these changes mean for us, the average consumer? How will they affect your money and your life? We’ll take a stab at that today, and I’m looking forward to your comments.

What Bend?

In their book, Andrew Benett and Ann O’Reilly describe 4 paradigms of the mindful shopper: embracing substance, rightsizing, growing up, and seeking purposeful pleasure. These are changes in the way people shop for and consume all types of products. They are rooted in some of the macroeconomic shifts we often discuss:

  1. Deleveraging: Too much debt on the balance sheets of governments and consumers means it will have to be unwound through reduced spending, increased revenues, or a combination of the two.
  2. Downsizing: Right now, we have too much of too many things. In order to bring our economy back into balance, we’ll need to do a lot of rightsizing – for the most part, that means downsizing.
  3. Destabilization: The structural changes required to rightsize our financial system and our collective balance sheet will mean that the status quo will no longer exist and that “normal” will be a moving target. Take some motion-sickness pills and prepare to adapt. 😉

Your success will likely depend on the financial parallels of the variables mentioned at the beginning of the article:

  • How healthy is your balance sheet as we approach these changes?
  • How much risk have you assumed in terms of your investments, employment, or lifestyle choices?
  • Do you feel like these challenges are so overwhelming that you are reluctant to meet them, or do you view them as a catalyst for positive change?
  • Will you embrace the coming socioeconomic evolution as an opportunity to implement real improvements, or will you try to maintain the status quo?

How to Navigate the Turn

There are a few main areas of your life that you may want to audit in order to determine whether or not you’re ready to make the turn as we navigate this new normal together:


For most of us, employment represents most or all of the income that supports our balance sheet. The deleveraging and downsizing that will occur over the coming years will likely mean continued instability in the job market. How can we prepare for and adapt to that possibility? Here are a few suggestions:

  • Maintain Your Marketability at All Times: Make sure your skills, resume, and qualifications keep pace with the changing marketplace. Be on the lookout for the emergence of new industries that might interest you.
  • Make Yourself Less Expendable: You may not be able to prevent a layoff due to corporate downsizing, but companies will always do their best to retain the cream of the crop. Make sure you rise to the top by performing your duties with consistency, integrity and efficiency.


If you are trying to boost your balance sheet by saving more and paying down debt, you will need to rightsize your spending habits, and perhaps downsize your lifestyle. Here’s how:

  • Plan Your Purchases: No more impulse buys, whether large or small. Taking a list with you and buying only what’s on the list, researching larger purchases ahead of time, and waiting for sales can help curb your expenses.
  • Budget, Budget, Budget: If you don’t know where your money is going, you can’t truly have control over your finances. A budget can be an extremely empowering financial tool. If you are spending more than you earn, you need to reduce your spending. It doesn’t matter how you do it, just that you do it.


Most of us have not saved adequately for the future. In the post consumerism era, we will not be able to rely on the stable pensions, stock market returns, or even reasonable interest rate yields of the past to fund our retirement goals. It is incumbent on us, in keeping with the “growing up” paradigm, to determine the best way to fund our future. We will likely need to earn more and save more in order to do so, due at least in part to some of the changes in the investment climate mentioned below.


I’ve written often about how the current investing climate will not look very much like the one we witnessed from 1980 – 2000. It’s not that tried and true strategies like dividend, value, or growth investing won’t work at all anymore; it’s just that the way we execute them may need to change a little as the post consumerism era unfolds.

Neither the stock market nor the bond market are likely to offer the returns of past decades, at least for a while. The economy will likely muddle through as we all attempt to rightsize our balance sheets. There is also a higher probability of more crises as we proceed through the deleveraging process and unwind the excesses of the consumerism era.

The structural changes needed to rebalance our financial system will like lead to more volatility. Markets will likely be riskier for a few more years – maybe even the next decade. I hesitate to offer any bullet points on this as there is no one-size-fits-all approach. Remember that your choices must account for your own retirement time frame and risk tolerance. With those caveats in mind, here are a few strategies you might consider:

  • Decrease Your Position Size: In keeping with the downsizing theme, it might be prudent to reduce the size of your allocation to riskier assets – that means any asset without a guaranteed return, including stocks, ETFs, equity mutual funds, and bond funds. Neither stocks nor bonds are all that attractive at the moment, but that doesn’t mean you need to completely avoid them, especially if you have a longer time frame. Reducing your exposure by raising your cash allocation is a good option. Some Canadian online banks offer higher interest rates if you park your cash in a TFSA savings account.
  • More Activity: Although many people have neither the time nor the knowledge to actively trade their portfolio, the new normal will require a little more agility due to the ongoing volatility. For some, this may mean rebalancing more frequently. For others, it will meaning maintaining a lower core equity position and trading some of their portfolio more actively – buying the rips and selling the dips as the cliché goes.


Becoming a more mindful consumer of products and services ranging from household necessities to investments means that we’ll need to educate ourselves. We need to learn more about personal financial management, investing, and saving. Many consumers are already taking on this responsibility, but they tend to trust fellow consumers more than experts or journalists.

Adapt and Enjoy the Ride

Those of us who write about the seismic changes in our economy are often viewed as pessimistic, paranoid, or just plain wrong. But many of the suggestions offered here are good advice whether these changes unfold in a smooth and orderly fashion, in a bumpy, chaotic pattern, or not at all. In fact, many of these changes are sorely overdue, and will eventually lead to an economy and a society with a much more sustainable foundation. In that sense, I couldn’t be more optimistic. 🙂

Are you ready to make the turn? What kinds of changes have you already begun to implement?


  1. I like [email protected]’s comment.

    There are also near-term risks from what I consider “zombification” — consumers with lots of debt, home mortgages, etc… who pay a big portion of their salary to paying off the mortgage, and thus have less disposable income to spend on other goods. This could become more of a problem especially should rates rise.

    • 2 Cents

      Consumers will need to retrench, and although the economy may be hurt in the short term by the Paradox of Thrift, it will be better off in the long run. Another potential snag lies in demographic trends. Boomers fueled a great deal of the spending and investment that made our economy go over the past 2 decades. As those folks start to accelerate savings and shift into more liquid investment vehicles, that will have ripple effects as well.

      To the other Kevin’s point, I just came across the quote that his comment brought to mind:

      “Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.” ~John Kenneth Galbraith

      Thanks to both Kevins for contributing to the conversation! 🙂

  2. George

    Thanks for the link. Great point about making yourself a valuable employee.

    • 2 Cents

      Thanks George. I enjoyed reading your thoughts on Overdose: The Next Financial Crisis.

      (For other readers, the link in the final paragraph with anchor text “seismic changes” will get you to George’s post.) It’s a great read!

  3. On your last point about being viewed as a pessimist for talking about these changes…society will always defend the status quo and resist change, and most of those labels probably come from insecurity about what’s going on.

    Right now we find ourselves at a place and time where there are multiple changes happening at the same time, many of them major. I believe we may be on the edge of a shift of historic proportions, maybe of the magnitude of the onset of the Industrial Revolution. The problem at the moment is that the future isn’t at all clear, and maybe this is why we cling to the models of the recent past.

    The truly optimistic way to view this is to embrace change, stay open minded, be flexible and be ready to move into the unknown.

    The crisis portion of change usually is the result of resisting it.

    If rampant consumerism is replaced by thrift, we may have to say goodbye to the economy as we’ve known it for the past few decades, but ultimately the foundation for something better is being built. After all, savings ARE wealth, and more savings=equal more wealth, even if the road getting there looks a lot like crisis on the surface.

    • 2 Cents

      Excellent points Kevin. I do think we are at the beginning of a period of profound change that will be a bit messy. If we handle it well, however, I’m hopeful that we can lay the foundation for a better socioeconomic structure.

      I think your points on optimism and flexibility are key. Thanks so much for sharing your thoughts! 🙂

  4. peter

    Like to part about reducing allocation to non secure investments. In this day and age it is the wise thing to do. Personally I have found that high interest savings accounts and GIC’s seem to pay as much lately as being in mutual funds, without the risk, especially when you factor in the fees that these fund companies charge. Not alot to be made with secure investments, but remember “a bird in the hand is worth two in the bush”.

    • 2 Cents

      I’m in the bird in hand camp as well, with most of our savings held in GICs and savings accounts. I’m not totally averse to investing in stocks, ETFs, or other investments, but I’m definitely a lot more picky about where I put our money than I was 5 years ago.

      Thanks for stopping by!

  5. Dd

    Great post. It is interesting to think about these changes and how it will affect us. Though I do feel the same as you do about the market being unstable for a few years, but I do not think we will hit a deflation period.

    I also think most people will not change, because the majority of people do not read these types of blogs.

    Personally I would keep my money in dividend stocks for dollar cost averaging and the occasional option on good and bad market days.

    Thanks again for the in depth post!

    • 2 Cents

      There are probably a lot of people who will continue to spend and collect debt until they just can’t anymore. There are also those who never did buy into consumerism in the first place. Their spending habits won’t change a whole lot. It’s that group in the middle that might end up being the biggest source of change. Let’s hope so.

      Thanks for your comment! 🙂

  6. Roshawn @ Watson Inc

    Very interesting and timely article. It certainly seems that being conscientious in multiple spheres is a recurring theme because of the volatile environment. I guess the uncertainty about the economy encourages this multi-modal strategy. Ultimately, much of this (i.e. deleveraging, right-sizing, etc.) is fiscal conservatism, which is why I especially like the section on enjoying the ride. It is so easy to lose sight of the fact that these changes are necessary and “long overdue” anyway.



    • 2 Cents

      I think conscientious is a great adjective for some of these new trends. I think I’ll borrow it in the future if that’s OK with you! 😉

  7. What do you think about the race by governments to get their consumers spending again?

    I find it interesting that the Bank of Japan would depreciate their own currency in order to encourage American consumers to keep buying their cars. That is a wealth transfer from Japan to the USA in order to prop up the old cycles of debt-backed consumerism.

    What is your take on this? Do you think we’re going to see a race to the bottom? I don’t see how everyone can gain an export advantage by lowering their exchange rate continuously via intervention, as the “advantage” (which is really just protection of the export industries at the expense of others) is lost when other countries do the same.

    • 2 Cents

      If you read some of the recent letters by John Mauldin, he explains the economic equation that points to this “race to the bottom”. Basically, most countries in the developed world want to devalue their currencies in order to boost the value of their exports. Of course, everyone can’t do that at the same time.

      I agree with you that this idea of trying to get consumers to buy more things they don’t need and can’t afford is not a sound economic policy. There must be some way for economies to periodically slow down in order to rightsize. We used to call those things recessions, but it seems they’ve been outlawed. So we are now missing that crucial balancing mechanism. What we are left with is a repetitive boom-bust cycle in which the booms seem to get progressively smaller and the busts get ever bigger.

      The “beggar thy neighbour” policies of the Great Depression are often cited as one of the factors that really made things go from bad to worse. It seems we are on the cusp of heading down that slippery slope. It doesn’t make sense to me, but neither did low interest rates for a decade or piling on mountains of debt. Those things happened anyway and they keep trying to pass the bill for them to taxpayers.

  8. Kevin Goldman

    At the moment, the active speculative activity of hedge funds is the main source of instability in financial markets. Often, only rumors that a large hedge fund has begun to conduct large-scale operations in the market for a certain product can strongly “rock” the market in one direction or another.

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