How The Recession Can Help Us

Back when I first started this blog and before the recession had really taken hold, I posted a link to a very good article by Liz Pulliam Weston. She talked about the impact it would have if we all started to increase our savings and use our money more wisely. She predicted that the short-term impact would be a global economic recession since our economy was so dependent upon consumers. But she thought it would be good in the long-run because of the positive impacts to both individuals and the broader economy.

I remember at the time thinking that managing our money and living within our means was still the right thing to do, but that it might be hard to convince people to do this because of the pain of going through a recession. Well folks, the recession happened, whether or not we wanted it to. So if we have to go through this, it’s encouraging to me to hear that savings rates are going back up (although no where near the high of 14.6% we saw in 1975). More people are starting to live within their means now. So maybe we’ll get the long-term benefits the article listed even though this wasn’t an entirely voluntary decision.

Responsible Spending Habits Slow Economic Recovery

Sarah Lockyer recently penned an article in Nations Restaurant News about decreased spending by consumers due to fears of unemployment. The article is based on research by Technomic Inc. which indicates that an economic turnaround will take longer because consumer spending is slower. From the article:

"The current broad unemployment rate, which includes not only those who have lost their jobs, but also workers who are underemployed or discouraged, has reached 15.8 percent and is rising, according to a July Technomic report from the firm’s consulting economist, Arjun Chakravarti. The prolonged climb of unemployment in the United States has not only affected the spending habits of those without jobs, but also has changed the spending habits of those who remain employed “by spreading psychological uncertainty across all workers in the economy,” Chakravarti said".

Although it would be nice if the economy would recover quicker, it will come back stronger and more stable if everyone increases their savings rate. I know that economists would be happy with a quick turnaround, but I for one am pleased to hear that people are developing more responsible spending habits.

Doing my part to contribute to a global economic recession

The idea of this blog is to share some of my knowledge to help people who have questions about how to manage their money to live within their means. After reading this article I wondered if this is really a good thing to do!