Archive for December, 2008

Economy and Savings, Is Consumer Spending Necessary?

Friday, December 12th, 2008
What’s happening with the Economy is a necessary part of the cycle.
With Americans saving less of their income over the past 15 years and each year the federal budget deficit growing larger the proverbial “bm” has hit the fan.  And finally, I say.  I know that consumer spending is good for the economy but does the economy have to rely THAT much on our spending?  When is it ever been healthy to spend all you make.  70% of Americans live paycheck to paycheck, spending everything they make.  That has to stop! 
Up until the late 1980s the savings rate hovered around 10% but since that time it’s dropped like a load of bricks.  In 2005 the savings rate went negative!  Do you know that the consumer credit card started being used (or should I say abused) throughout American families in the 1980s, even though they came out much earlier?  I see a correlation there.  Remember that old saying, if you can’t see it it doesn’t exist?  If you don’t carry money around in your pocket you won’t spend it.  So with credit cards you don’t see the amount increasing so you just keep on going.  Then there’s also the beloved thought that we all deserve the good life, don’t we?  And spending takes us there, doesn’t it?  It’s only money after all.  Right!
I think our economy needs to rely less on consumer spending.  If we all spend less on frivolous things then we can save more.  If we save more then more money will be in the investment arena.  With more saved money each year that beautiful compounding interest process can go to work creating more millionaires of us in our later years. 
Isn’t that were each of us want to be?  Financially free of our debtors, making our money work for us, having real assets to support us through those many years of retirement.  Isn’t that everybody’s dream? 
4 Steps to financial freedom
1.  Pay Yourself First (save)
2.  Reduce unnecessary debt (spend less)
3.  Manage your money smartly (ThinkMoneyWise)
4.  Develop multiple streams of income (make more money, start a business)