Finance Fridays

Yep, it's back. I didn't forget about it, just took a little break. Today I'm going to discuss two topics - phrases I have heard quite often lately. The first is a comment on how restaurants and retail stores are always full to the max with customers yet we are in a "recession" and people can't afford their mortgages. What's up with that? The second is a comment that says "but I hardly spend any money on myself, I always buy for others."

First - we are in a recession. Just because people are treating themselves to a nice dinner doesn't mean that we aren't in a recession. There are two types of spending, to put it in layman terms, debt spending and cash spending. Unfortunately over the past 50 years our nation has become heavily reliant on debt spending which has increased exponentially over the past 20 years. For clarification, debt spending is buying a house or purchasing the HDTV on a credit card. Cash spending is going out to eat and paying with it in cash (this includes check or debit card), going to the movies, or saving up to purchase the HDTV. Our economy has become so loaded down with debt that it finally caught up with us. A few major-billion-dollar companies started to go under and it effected the rest of the nation. It is slowly trickling down to the common man. So, the consumer can still afford the instant gratification of spending a little bit of cash on dinner but they can no longer afford the instant gratification of buying something on credit. Since the debt-spending has slowed down to almost non-existent, which was the majority of the spending happening in our nation, the economy is getting hit hard.

Second - just because you buy for others doesn't justify the fact that you are still spending money. At the end of the month when you look back on your finances and wonder where all your money went think about where you spent it. If you realize you spent it buying things for your children, spouse, or best friend that doesn't mean it is okay. You need to control your money not let the money control you. If you don't know where all your money went that means it is controlling you. There are a few simple steps you can take, first, put money into savings. Second, figure out what you need to buy over the next pay cycle and divvy that money out on paper, keep this paper somewhere to remind you of your obligations. Third, be conscious of what you spend. You will see a huge difference in your spending habits by simply being conscious every time you swipe that card or make a purchasing decision. Think of the things you are giving up to have that item.

In conclusion: help the economy out and yourself by saving. You will be a happier person and your family and friends will be happy that you are happy and won't miss your purchases in their behalf. Sure it's okay to treat you and your spouse to dinner every now and then. But if you want a new couch or a nice vacation save up for it. Not only will this help the economy but you will appreciate the vacation so much more because you worked so hard to get it.