Trading Down: Americans Opt For Simpler Lifestyles

Oct. 28, 2007 — -- Americans are known more for being spenders than savers. But a slowing economy has much of the nation tightening its budget and searching for inexpensive options, ditching big-budget items and designer clothes for more practical fare.

Trading down has become part of the harsh reality of seeing a declining housing market, a credit crunch and other gloomy economic indicators.

"The American consumer is definitely starting to feel pinched and they're doing this sort of trading down in terms if what they're buying," said Wendy Bounds of the Wall Street Journal. "Retail organizations are predicting that we're going to see a decrease in people who go out and buy a gift for themselves, as well as buying a gift for their friends and family."

Doug Kessler of Thornton, Colo., traded down after he and his wife put their three children through college. He ditched his SUV for a motorcycle, not because of a mid-life crisis, but as a way to cut down his spending.

"The payment lowered, gas mileage is better and we're saving a ton of money," he said.

By putting the brakes on their indulgences, the couple was able to bank more than $40,000.

It wasn't just trading down their vehicle that helped them save money. Simpler things like holding back on coffee and lunch helped, too.

"Just to get a small latte for me is $3.74 a pop," said Sallye Kessler. "You extrapolate that over a year, and you've got about, that's $1,000 in lattes. So, I don't do that anymore."

"One of the things that was real easy for me was eating out at lunch every day," Doug Kessler said. "If you go out to lunch everyday, you're going drop between $5 and $8 a day and that adds up quick."

The Kesselers aren't the only ones scaling back. Rising gas prices have driven up the popularity of compact cars, which have had a 4 percent increase in the last three years.

Even spending on home improvement is expected to decline for the first time in five years.