Spending Money We Don't Have

I’ve been a bit reticent in my posting lately because sometimes life just gets in the way! However, I recently ran across a story on NPR that I just had to chime in about though. Consumer Spending Up, Incomes Lag talks about the increase in spending that resulted from programs such as Cash for Clunkers while income growth continued to be just about flat.

As a proponent of good debt only, this story scares me a bit. If we’re not making more money, we shouldn’t be spending more money. The statistic offered about the falling savings rate was also a bit disconcerting, but did have some good news when compared to savings rates last year.

“The big jump in spending and much weaker gain in incomes translated into a big drop in the savings rate. Personal savings in August fell to 3 percent of after-tax incomes, down from 4 percent in July. That was still nearly double the savings rate of a year ago. Economists say the savings rate will keep trending higher as households try to repair investment savings shredded by the recession.”

We all want the economy to recover, especially so people can get back to work. But a recovery based on additional debt won’t be a long-term permanent recovery, it would just put us back on the precarious house of cards that our economy was built on before the recession occurred. So the Money Maiden’s advice is to keep putting that money into savings so that we can all benefit from a stable economic recovery.

Are We Learning a Lasting Lesson From the Economy?

I was reading a blog that I enjoy the other day called Bing's Blog. He has a post about things that we've learned during this economic downturn that we should, but probably won't remember when the economy turns around. Item #5 on his list worried me a bit.

It seems that everyone is more aware of their spending habits these days, which as the Money Maiden, I think is fabulous. But he predicts that we'll all forget that unchecked consumerism and no savings were problematic, and that we'll all start doing it again. I imagine that he's not far off the mark. I look at my grandparents who grew up during the Great Depression and their lifelong frugality. Don't get my wrong, my parents are very responsible with their money (they taught me after all), but they aren't as stingy as my grandparents were. So if I were a betting woman, (I'm not, that's not responsible money management!) I'd take the bet that once the economy recovers, some of the people who had become more responsible out of necessity will go back to their old ways. But I hope that not everyone does. I hope that we as society start focusing on saving money, and producing things for others to buy, instead of trying to build our wealth from a house of cards like we did in the past.

Can You Help the Economy to Recover?

This is a great post about the part that consumers, you and I, played in the current economic recession.

The encouraging thing is that maybe you and I can help to eventually turn the tide by being responsible with our money. Thus this blog.