Spending Is Patriotic....Right?

Well, we’re just a couple of days away from the “official” start of the holiday shopping season. Everywhere, you hear the dire predictions of spending cutbacks that translate to sluggish retail sales.

Generally, there are now three classes of shoppers:

1) Those who will not be affected at all (read CEO’s, trust fund babies, etc.)
2) Those who will be affected out of necessity…they have lost their jobs, their hours are cut back or if they own a business, they are losing money.
3) Those who are affected out of FEAR of losing their jobs. Many of these people have lost real dough in the stock market, but it was the 401K that took a hit—for many, the outlook for a secure retirement took a punch to the gut.

Most people fall into category #3…..with gas and heating oil prices plummeting, those who are still employed are enjoying MORE disposable income, not less. However, it is thought that they too will cut back spending…out of FEAR.

A crisis of confidence is fueling the behavior that fails to ring up sales. Economic experts say that we as a nation have lived FAR beyond our means for years, financing our flat screen TVs, our electronic gadgets and other toys with the so-called “equity” we had built up in our homes. When those home values dropped, the squeeze was on. As a nation, we have the one of the lowest savings percentages of any civilized country. For many, it is debt, credit card debt-growing without an end in sight, evidenced by the number of personal bankruptcies being filed.

If there is a trick, it is simply this: Regardless of your income, determine your monthly living expenses—and include only necessities….HBO is NOT a necessity. After that figure, add in a reasonable amount to sock away. 10% is great, but not everyone can do that much. The idea is to “pay yourself first”. I would have always suggested the stock market—maybe not now, but this is a good time to buy—if only you knew WHAT to buy. Seems everything is a bargain, but then again, some of these companies (like GM for instance) may not be around this time next year.

After the needed expenses and some savings, if there is anything left over—GO FOR IT! Spend away—or start paying down the credit card debt! Eliminating this consumer debt should actually come before saving, since the interest on a credit card is at least 18%--and the best money markets are paying about 4%.

Then…if you have dough left, go out and help stimulate the economy! We need to hit the RESET button, come to our senses—and then do our part to keep businesses BUSY!