Editor's Note: This is Part II in a special 3-part series on the economy. Read Part I: Recession Watch: Is the Economy That Bad?

Americans are experiencing the effects of the current recession. Employers are cutting wages and work hours. Millions of people are losing their jobs.  Household income is declining.

At the same time, many consumers have been hit with the realization that they have too much debt. This debt was based on too few assets. In the past, easy access to credit led to more borrowing and higher amounts of credit. Feeling wealthier, consumers spent beyond their income. U.S. households are in far greater debt today than ever before.

Stretched like a balloon, budgets have reached their breaking points. A Money magazine poll shows that 88% of us will be more frugal, and 89% are making changes in how we manage our finances (Money, June 2009).

People are discovering that recession corrections can be painful. Although not always welcome, market corrections play a useful role eliminating unwise practices and players. Many over-leveraged banks, businesses, and families are learning the hard way that sound financial principles win out in the end.

America's Changing Economic Habits

Millions of Americans are experiencing a rough time. The middle-class is being hit particularly hard. Accustomed to a certain standard of living, it has been difficult for consumers to give up things they believed to be essentials in life. Whether they are good money managers or not, they are being affected by the recession.

Many consumers have had to make lifestyle changes to survive. Desiring to improve their financial situation, they are finding ways to balance the budget.

In a forum on “The New Frugality” (C-Span, 4/17/09), Pennsylvania high school students discussed how their families are making changes. Here are their responses:

Brent – Our family carpools, and we share cars to save money.

Krystal –I’ll eat at home more often instead of eating out all the time. I’m attending college next year, so I’m looking for ways to cut back on spending.

Carlos – Our family has always talked about budgeting, saving, and fiscal responsibility. In our home, credit cards are taboo.

Peter – We limit the number of cars to two cars and we cut down on driving. I’ll take the train into Philadelphia instead of driving. Since I was a sophomore, I’ve been doing odd jobs and saving money for college.

Megan – I work in a restaurant for extra income. I’ve noticed lots of people stop by to fill out applications.