Member Log-In
How Spending and Saving Are Changing
Spend or save? It was once a fairly straightforward question: You spent what you needed and saved the rest. But as mass consumption has become a dominant force in the U.S. economy, the tension between spending and saving has become far more acute.
After a grudging, three-year experiment with thrift, Americans now seem to be rediscovering retail therapy. Spending is up about 5 percent this year, a healthy rise considering that unemployment is high and the housing market remains depressed. But incomes have risen by less than spending, which suggests that people are saving less and turning once again to credit cards to fund purchases when they don’t have the cash. For some shoppers, renewed spending power may even be coming from defaulting on past loans, which eases the crush of debt and frees cash.
A sustained boost in spending is just what the economy needs to get out of the doldrums. But if it brings with it a return to bad financial habits, then the economy could end up worse off overall. Many consumers still have too much debt, and millions of homeowners have lower net worth than they did a few years ago, due to punishing declines in home values. Plus, a lot of baby boomers are unprepared for retirement, which means they’ll need to build up their nest eggs in a hurry. Spending too much now could leave a big hole later, cutting into spending indefinitely.
In the aftermath of a grueling recession, spending habits are changing in ways that economists and marketers are eager to understand. With money more scarce than it used to be, some changes are fairly predictable, such as the substitution of store brands for costlier designer brands. Other changes may be more subtle. And on some things, Americans may be trying out new ways of handling their money, only to settle back into familiar patterns.
To read more click here
December 29th, 2011 at 5:52 pm
I know my family’s priorities are changing, that’s for sure. Buying a house doesn’t look like the sure investment it did even a few years ago. Now, if or when we finally buy a home, we’re going to make sure it’s somewhere we would want to live indefinitely.
January 3rd, 2012 at 4:24 pm
[…] Read More articles from ClearOne here […]
January 4th, 2012 at 11:01 pm
The idea is being bandied about that the past few years haven’t been a recession, but a structural change in the workforce and economy as a whole.
Consider the fact most manufacturing jobs have been either cut because of robotics, or gone offshore. The demographics are getting older too, which means more people are taking money from the stock market and using it for retirement.
We may need to rethink how we spend and what kind of sustainable lifestyle will can have from now on. Things will get better, but people need to change their priorities to make it happen.