Minimalism and the New Frugality

Tiny houses may be more than a guilty pleasure. While the 200 square foot lodgings are beyond adorable, what attracts us to them may be a trend worth watching. The tiny house “movement” combines two other cultural zitegists – minimalism and the new frugality. Both trends impact directly on the funds available for savings and retirement. In fact, both trends are partially motivated by a want to ensure a stable financial picture and one that includes a healthy retirement.

In the last decade, income grew by 26% yet expenses have grown 37% or more, according to Nerd Wallet.  And the average household is paying almost $7000 in interest per year: that’s almost 10% of the average household’s income going straight to debt.  It’s a massive impact on quality of life.

And, both Millenials and GenXers are facing a shortage of full time, stable, “career” jobs. As Kiplinger reported, from October 2010 to January 2014, the share of all Americans ages 16 and over who are employed has hardly budged, moving from 56.5% to only 56.6%. Total U.S. jobs have shrunk by 2 million and full-time jobs by 5 million.  The new frugality and minimalism offer a degree of flexibility for those trying to make non-full time jobs work.  And, in terms of saving for retirement, it’s crucial: 7 % of Americans live paycheck to paycheck, says minimalist Sam Farrington. Coincidentally, 72% of Americans report feeling stressed about finances.

The new frugality calls for practical ways to live below your means, as a way to redefine rich. This includes lowering cell phone plans, but also, putting 50% of all raises towards savings or retirement.  So where previous generations would increase their standard of living with large increases in income, both GenX and the Millenials are not. And part of it is redefining what affluence is. The new affluence, under minimalism or the new frugality, means more time to spend with friends and family, more time to travel, or work that is more engaging or impactful.  The common denominator among almost all of the articles, books and blogs about both minimalism and the new frugality: by saving more, both for retirement and for emergencies, you can stop worrying about money. 

GenX’s frugality, seen through a love of coupon and bargain blogs, as well as DIY shows, is driven by the same thoughts about controlling what can be controlled – expenses – rather than fussing about what can’t- revenue as is for Millenials. For GenX, which survived two market shocks (in 2001 and again in 2008), job security is a chimera, an imaginary beast. And that holds for those who invest personally, but also as GenX has moved into management roles, how they chose to allocate budgets.  This means that many GenX managers tighten up on costs and stay tight because they see this as a way to protect their employees from unexpected downturns in the economy.  And this also holds for personal spending, as noted by a recent survey by Deloitte, 94% of consumers plan to keep spending at current levels even if the economy improves.

Millenials see minimalism, as a door to freedom. What is minimalism? It’s the idea of intentionally bringing into your life only the things that you find valuable and use often. And it’s a flexible enough concept that it can be adapted across cultures.

Marketing to those attracted to minimalism (and frugality) is a smart move, when it goes to the heart of what drives those twin trends: freedom (or flexibility) and security (financial savings).  Minimalist bloggers and social influencers like Joshua Becker, note that new minimalism blogs  (like his, at www.becomingminimalist.com) seem to pop up everyday. He cites a variety reasons why minimalism is growing. Among those reasons include rising unemployment and stagnant wages that drive consumers to make more choices about essential and nonessential purchases. Along these same lines, the environmental impact of “fast fashion” and overconsumption (how cheaply made clothing harms the environment in its manufacture, transportation and ultimately, its removal) has become more of a subject of environmental concern. Becker also notes that high levels of personal debt, both because of student loans but also because of overconsumption, have reached a peak point for many Millenials. He also notes the same desire as the GenXers in terms of flexibility in careers and work hours offered by minimalist lifestyles. In fact, Millenials are entering one of the worst job environments saddled with much higher levels of student loan debt.
 

The impact on saving and retirement is noticeable: according to a Harris Poll, 38% of millennial parents save more than 15% of their income for retirement. And they are doing it, according to Nerd Wallet, by making sacrifices in what they buy. 76% of Millennial parents report having sacrificed something in order to save for retirement. And this goes beyond those with children, 41% of Millennials report reducing dining out to allow for saving. And much of that is a question of priority – in fact, 61% of Millennials parents call retirement one of their top long-term savings priorities, according to that same Nerd Wallet survey.

So whether it’s the New Frugality (GenX) or minimalism (Millenials), understanding that there is an audience who is ready to hear how lowering consumption can help lower financial worries may be of use in your communications. After all, a $5 latte habit a week is a $10,000 investment over decades, even without compounding interest.