How to Live Happily on 75 Percent Less

Nine months after getting laid off, Catherine Goerz once again became part of the rush-hour commute–in a way she’d never anticipated.

To pick up extra cash, Goerz took a temporary job handing out fliers touting the benefits of public transportation in the San Francisco subway system. Occasionally she’d bump into people she knew from her former job as a creative producer for a Bay Area communications company. “They’re in their corporate clothes,” she recalls, “and I’m in this silly T-shirt and hat. ‘Cathy, is that you?’ they’d ask. ‘What are you doing here?’ Ugh.”

The Great Recession–which is technically over, economists insist–may be morphing into a broader epoch: the Great Humbling. Millions of Americans who felt prosperous just a few years ago are now coping with long-term unemployment, sharp cutbacks in living standards, foreclosure, bankruptcy, and a deep sense of failure. That could persist for years. “This is not like earlier recessions, where things fell, then they bounced back to where they used to be,” says Dennis Jacobe, chief economist for the Gallup polling organization. “We haven’t seen this before. It’s the only time this has happened since the Great Depression.”

For many disenfranchised workers, the “new normal” is demoralizing. But some have found fresh career paths, clarified their priorities, and discovered that they’re more resourceful than they once thought. After absorbing the initial shock of being laid off, 37-year-old Goerz decided it was the chance to pursue a long-time goal: Filming a documentary. She traveled cross-country with friends and produced a short film called RE:Invention, about creative ways people were toughing out the recession. After a screening at a local film festival, she won a small grant that helped her fund a longer version, which she hopes to finalize soon.

The grant covered only a portion of the production costs, however, with nothing left for living expenses. So Goerz survives on monthly unemployment insurance payments, supplemented by odd jobs and freelance projects. It adds up to just 25 percent of what she earned when employed full time. That has required severe cutbacks but also triggered new discoveries. “My quality of life has not changed at all,” she says. “I think it’s improved because I’m exploring what I want to do. When I see postings for full-time jobs, something inside me says, ‘No, don’t do it.’ I want to make sure I am making the right choice.”

Goerz may be at the vanguard of a historic shift in American attitudes. Researchers studying long-term trends among American consumers believe that a 20-year spending binge, fueled by easy credit, is over for good. “Smaller things now make the bigger statement,” according to a new report on consumer trends by the Futures Co., a market-research firm. “The infatuation with having it all–and having it all at once–will give way to putting priority only on what’s most important.”

The first step is learning to be comfortable without the customary trappings of middle-class life. Many laid-off workers resist abrupt cutbacks at first, to preserve a sense of normalcy. Goerz did the opposite. She received just two weeks’ severance when she lost her job in December 2008, and her income fell from about $8,000 per month to $1,900. She put $5,000 in a savings account for emergencies and used the rest of her savings to buy a certificate of deposit, so she couldn’t withdraw the money if she wanted to. That meant she’d have to live on no more than what came in every month.

Unnecessary spending on jewelry, clothes, makeup, handbags, movie rentals, music downloads, vacations, taxi rides, and most conveniences stopped. She’d love to buy a new MacBook to help with networking, building a personal website, and promoting her film, but instead she nurses a wheezy old Dell laptop, using programming tricks learned from friends to keep it kicking. When Goerz met a potential client about some freelance work recently, she freshened her outfit with a $10 designer blouse from a consignment shop. Instead of going to a salon for highlights, she squeezes lemon juice into a spray bottle, dilutes it with water, and squirts that onto her hair–a $1 trick she learned as a teenage lifeguard.

Food had been a big part of Goerz’s budget, so instead of spending $10 on lunch every day and going out to dinner four nights a week, she’s cut back to two homemade meals per day–a late breakfast and an early dinner. Her diet is more healthful now, and there are other benefits: “I can wear clothes from three years ago, when I was on this huge fitness kick. Suddenly, I have a whole new wardrobe.”

Goerz still goes out with friends once or twice a month, but always economizes: “My strategy for going out is to eat only half of what I order and bring the other half home. Then I turn that into two more meals, since I keep fluffing it up with more rice or something else.” Goerz laughs as she says this, aware of her extreme thriftiness. “I stretch everything,” she chortles.

A close circle of friends helps compensate for the spartan privations. One friend who loves to cook hosts a weekly Monday dinner for Goerz and half a dozen others, who usually show up with a couple of bottles of fine wine–one remaining indulgence. Many of Goerz’s friends are also out of work, and even those with good jobs seem to have caught the thrifty vibe. “Even people who don’t have to cut back are doing it,” she says. “It’s a new kind of consciousness. They seem to be thinking, ‘I don’t need all this.’ ”

Most Americans can live without the proverbial daily latte and a few other niceties, but economic data and anecdotal reports suggest that it’s a much bigger struggle to accept permanent lifestyle diminutions, save considerably more, and break with familiar spending habits. Goerz attributes her transformation to lessons learned from other crises she survived: getting laid off in 2001 amid the dot-com bust, a recent family death, getting robbed while traveling alone in India seven years ago.

Still, she’s not sure how long she can live on a reduced income. Her health insurance premium recently quadrupled, to almost $400 per month, after a government subsidy expired. She lives with three roommates, which keeps her rent at an affordable $871 per month. But she craves her own place, which would obviously cost more. “I have this niggling fear that I’m screwed,” she says. “Will I ever be able to buy a home or a car? That’s my biggest motivation to succeed financially: to get my own place.”

Goerz fosters an outside hope that the debut of her documentary might lead to paying work in the film industry and a fulfilling new career. But she also knows that she may end up back in corporate America, sacrificing some of her freedom for comfort and stability. So she’s also looking for jobs in her old field, hoping to find a perfect fit. Even if her income goes back up, however, she hopes that her new lifestyle sticks. “I’d want to save money like crazy,” she says. “I’d like to experiment with keeping my frugal ways.” Today, that sounds like a novel idea. Tomorrow, it might be mainstream.

Posted in Finance, How To.

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