Tuesday, February 3, 2009

Spend or Save Our Hard-Earned Cash?

Martin Crutsinger of the Associated Press has recently reported that American's are saving more, spending less. According to the article, Americans are now saving 2.9 percent of their after tax incomes which is up sharply from 1 percent a year ago. He noted that this increase in savings is good for the family but not necessarily good for the economy. As savings rate rises, spending falls. When consumers are not spending, layoffs rise. This causes people to become more thrifty and the recession then deepens. He noted that today's consumers may start to rival their "penny-pinching, Depression-era grandparents." This may not be good for everyone involved.

However, in all of my readings of today's economic crisis, there has been little discussion on the positive effects of this recession. Since we are saving more and spending less, we are being forced to be content with what we have. Many of us are becoming even more conscious about not being wasteful and less focused on "stuff." When the economic boom of the 1990s was occurring, I personally became disgusted with our wastefulness, our acceptance of so many cheap products, and our evaluation of an individual based on the individual's personal financial portfolio. Today's economic crisis is helping me readjust my values and to me, that is a good thing.

I personally disagree that we should begin spending freely as we have in the past. I have doubts that the current stimulus plan being put forth by Congress is the way to go since its purpose is to get us to spend more. My overall gut opinion is that we need to let our economy shrink to a sustainable level. Shrinking of the economy could result in more people putting their priorities in sharing experiences with their loved ones and friends as opposed to becoming obsessed with the almighty dollar.

Our family certainly is not escaping the effects of the economic crisis. We have a small business and many times we do not even know if we can pay the bills. We have to pay for our own health care and we are getting taxed to death. Our heat pump broke this winter and we are heating our house with wood since we cannot afford a new heat pump at this time. This is all very stressful. However, I have noticed that we as a family are beginning to appreciate the small things in life such as being with one another in idle time or worrying together about the raccoons knocking over our garbage. I have noticed that focusing on the more mundane aspects of life can actually be quite fun.

I encourage our families to continue the pattern of saving despite what all the economists say to do. Any hint of us going back to the reckless spending of our hard-earned cash on junk should be met with a big resounding "no!" Save and get yourselves free from greedy fingers of credit card companies and banks. Force our businesses to focus on quality again so our lives can once again be more wholesome as of those in the past.