US RECESSION? Should you save or spend money now?
Economic indicators point to a slowdown for the fifth consecutive month: manufacturing & services slowing, companies cutting jobs accompanied by first time claims for jobless benefits increasing, continuous deterioration of the housing market, stock prices down, etc.
Jean Murray of Small Business Boomers citing Jennifer Heigl’s Daily Blender presents evidence of consumer spending pushing the US economy into recession.
Technically, an economy is in recession if indicators drop for 2 consecutive quarters.
Whether the US is in actual recession or not, consumers feel it is. Consumers, even those with comfortable discretionary disposable incomes, are behaving as if recession has already occured.
Should you save or spend money now?
Even during a stable economic period, many wage earners have a very difficult time controlling Expenses which actually grow more rapidly than the increases their employers are willing to give. Thus, very little savings (or worse, no cash surplus at all) are generated.
The best way to control Expenses and actually SAVE some amount is to spend money on an Asset that you really want and can pay for in installments.
Because the Asset is something you really want and you do not want to lose the Asset, you will actually control your Expenses so you can meet the payments.
At the end of the installment period, and because all during this period you have controlled your Expenses at a level where you can make the payments, you will find that you actually have surplus cash, i.e., the amount you have been allocating for the installment payments.
The net effect will be as if you have been given an increase in pay, i.e., the amount you have been allocating for the installment payments.
At this point, look for another Asset you really want and would hate to lose. And, use the surplus cash to purchase, the Asset again on installment.
If you do not do this, you will go back to your old ways of spending all your salary in Expenses which grow more rapidly than the increases in your pay and which you have not been able to control.
Images from Microsoft Clipart
Tags: Assets, companied cutting jobs, economic indicators, economic recession, Expenses, first claims of jobless benefits, Saving by SpendingRelated Stories
POSTED IN: Accounting Concepts, Accounting for NonAccountants, Best Business Practices, Personal / Household Finance, Random Thoughts on Accounting, Saving by Spending
3 opinions for US RECESSION? Should you save or spend money now?
Mark
Mar 28, 2008 at 2:45 pm
I’m not an expert, or well-educated - but I did stay in a… oh, never mind :)
My understanding, from what I’ve read, is that withholding capital from the system increases the prospect of a recession which is why the gov. is attempting to inject billions into the economy - except the purpose would be defeated if everyone held on the the stimulus bucks.
But Chimpey says there is no recession so I must believe - right? (Not!)
b5media - Recession? What Recession?
Mar 31, 2008 at 5:51 am
[…] doesn’t mean that you have to spend like one. Ren at Accounting Solver questions whether you save or spend money now. Ren also notes that the recession isn’t just hitting the US markets - read his series to find […]
Accounting Solver To The Rescue
Apr 8, 2008 at 9:10 am
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