10 Ways to Thrive After the Recession

Get a better bank, take advantage of new government programs, and don't overdo frugality.

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Get competitive about it. The recession inspired Washington, D.C.-based yoga studio owner Annie Mahon, 46, to start a competition with her husband to see who could go longer without buying anything new. (They make exceptions for groceries, medicine, and certain items for their four children.) Instead of curling up with catalogues that arrive in the mail, Mahon puts them directly into the recycling bin. "It feels great, because afterward, there's no residual feeling of, 'Oh, I wish I had gotten this.' So far, it doesn't feel like I'm missing anything. It feels like I'm gaining," she says. Wanting or craving things soaked up energy, Mahon adds. She estimated that, six weeks into the competition, she had saved at least $1,000.

Take advantage of the way retailers have changed. An advertising campaign touts that "summer costs less at Wal-Mart." One television spot features the simple pleasures of the season, including hot dogs, popsicles, and running through sprinklers. Target's "New Day" ad campaign, which ran from September through May, highlighted ways to save money: cutting hair at home, staying in for a movie night, biking to work.

Lena Michaud, a Target spokeswoman, says the company has seen sales increase for products that let people cut costs by staying home, including nail polish and hair color, single-serve coffee brewers, and popcorn poppers. People also are making the most of what they already have. Michaud says that Target's sales of scarves and fashion hats have gone up as customers freshen up old outfits with new accessories.

"We are not bouncing back. The face of retail and consumption has been fundamentally changed," says Paco Underhill, author of Why We Buy: The Science of Shopping. Even before the recession, there were too many stores, a problem that has started to self-correct through business bankruptcies and closings, such as Circuit City's. What's changed? "People are no longer celebrating how much they spend but how little they spend," says Underhill.

[Slide Show: America's Most Endangered Malls.]

John Quelch, a marketing professor at Harvard Business School, says that although the length of the recession will determine just how long the newfound frugality lasts, up to 10 percent of consumers will change their behavior on a sustained basis. "Many of those changes will be in favor of reducing consumption and a simplified lifestyle," he says.

Although these consumers are still in the minority, there are enough of them to make retailers take note. "It's a huge shift in buying power," says Quelch. Because consumer spending makes up such a large portion of our economy (about 70 percent of gross domestic product), 10 percent of consumers represents a huge dollar value.

Make use of new government policies. New programs from government and financial institutions encourage consumers to hold on to their thrifty habits. Recently passed credit card legislation makes it harder for people under 21 to get credit. Congress also allocated funds for financial counseling for those facing foreclosure and already requires counseling for those considering bankruptcy.

Educate yourself. Susan Keating, president of the National Foundation for Credit Counseling, says her organization is pushing lawmakers to require prepurchase counseling for first-time home buyers and for people considering nontraditional mortgages. In the NFCC's survey, 28 percent of respondents said the terms of their mortgage turned out to be different from what they expected. "That suggests they didn't understand it going in," says Keating. The NFCC would also like financial education courses to be mandated in high schools. Some states, including Missouri and New Mexico, already have such requirements, but most do not.

Save more. President Obama has suggested providing savings incentives to low- and middle-income Americans by matching half of the first $1,000 such families set aside. It's those groups that have the most trouble saving, says Tamara Draut, vice president of policy and programs at the research organization Demos and author of Strapped: Why America's 20- and 30-Somethings Can't Get Ahead. Government data on savings rates aren't broken down by income level, and Draut suspects that those in the higher income brackets are driving the recent increase in savings rates. "They have the ability to move the aggregate in a way that might be masking the continued declines in savings among low- and middle-income people," she says.