Even though the sky is not falling, many Americans are in a panic over their tumbling finances.
The noxious combination of the slumping economy, increasing unemployment and hideous stock market volatility may even have long-term impact on how Americans feel about spending if it continues beyond a couple of years, according to sociologists.
"Never before have individuals had such a high level of household debt," said Dalton Conley, chairman of New York University's sociology department. People are going to have to return to a more basic standard of living, he said.
Americans who are busy making credit card payments and are severely leveraged with mortgage payments will have to cut discretionary spending, Mr. Conley said. "There will be a move to things that we value outside the economy, things that we forget about when there is a boom."
People will be spending more time with family and friends, he predicted. That trend will be further enhanced as the amount of work available declines and Americans have more time available, Mr. Conley said.
If the economic troubles continue for more than about three years, the financial behavior of an entire generation could be altered in the way that the Great Depression imprinted habits on those living through that period of economic decline, he said.
"Relatives who survived the Great Depression have different values," Mr. Conley said. "They knew the specter of what could really happen."
Americans will have to learn to save now because they no longer have access to the credit they have been living off of, said Tom Manheim, a former financial adviser who now specializes in financial coaching through psychotherapy in Solano Beach, Calif.
"Trouble is, most people don't even know what a budget is," he said.
Among the belt-tightening adjustments that middle-class Americans are expected to embrace is getting together more often with friends and family to have picnics and dinners at home, as opposed to meeting at the latest trendy restaurants, Mr. Manheim said. People will also travel to national parks and beaches instead of attending expensive attractions and events.
Parents who join the growing unemployment rolls will spend more time doing homework with children, getting involved in school-based associations and volunteering in their communities. "We are, in fact, headed towards a different way of living," Mr. Manheim predicts. "Americans are realizing that we are not the invincible superpower we used to feel like."
In fact, the near-daily barrage of negative economic news "is threatening to the way we think about ourselves and our environment," said Terry Pettijohn, assistant professor of psychology at Coastal Carolina University in Conway, S.C.
Even people who aren't directly affected by the slowing economy, the falling stock market or rising unemployment are making proactive spending cuts because they recognize economic conditions could get worse, he said.
Charitable giving may be the next victim of this crisis.
"We will see a decrease in the amount donated to charities in coming months," Mr. Pettijohn said. "People want to hang on to their money right now."
Financial advisers offer a mixed report on whether the turmoil has influenced clients' behavior.
"People are tightening the belt and cutting down on discretionary expenses to help shore things up," said Michael Busch, an adviser with Vogel Financial Advisors LLC in Dallas, which manages about $125 million in client assets.
Even wealthy people who have enough money to continue spending as they have been for years are scaling back, he said. "It's human nature to feel a little poorer as you look at investment balances."
People are going through a process of questioning what they put their faith in for security at a time like this, Mr. Busch said. Right now, they are finding it more through family than wealth, he said.
One client with a significant portfolio said he recently received a solicitation for funds from his child's private school. "He said he immediately tossed it in the trash," Mr. Busch said.
People in the habit of giving to charities for strong personal reasons may not cut back on their giving, one adviser said.
Certain clients actually reduce spending in other areas first if they are used to giving to charities and they trim philanthropic giving only if they begin to personally suffer, said Steven Medland, an adviser with TABR Capital Management LLC, an Orange, Calif., firm that manages about $150 million in client assets.
Not everyone, though, believes that the financial crisis is serious enough to warrant changes in their lifestyle or attitudes, according to some advisers.
"An awful lot of people are kind of sticking their heads in the sand and assuming it's going to get better sooner rather than later," said Norm Boone, president of San Francisco-based Mosaic Financial Partners Inc., which manages about $385 million in client assets. "It's tough to change behavior."