The current financial crisis is the result of overspending by banks, government, corporations and everyday people. As a society, we have bought homes above our means and we have spent money we don't have.
According to a recent survey, 86 percent of Americans have decreased their spending or changed their investment plans as a result of the financial crisis.
The American government desperately wants its people to spend! In fact, 70 percent of American economic activity is the result of consumer spending.
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Processed and prepared food will always cost more than non-processed and unprepared food. For example, consider the price difference between shredded cheddar cheese compared to a block of cheddar cheese.
Low spending results in low production, and low production results in job loss. Further job loss simply perpetuates the cycle of low spending even more.
Paradox of thrift, first coined by Keynes during the Great Depression, involves the lose-lose situation between spending and saving in an economic crisis. Spending may increase your debt, but it helps improve the economy. Whereas saving decreases your debt, but further perpetuates an economic crisis.
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The economy will falter if no one spends. This is why the government urges its citizens to shop and why both the Bush and Obama administrations provided big tax rebates to tits citizens.
Saving was so unpopular in the United States that saving rates actually went below one percent in 2005. Not only were Americans not saving, they were spending their already accumulated savings.
Since 2005, the United States savings rate has skyrocketed to a decade high of 5.7 percent. But this was bad timing for the economy, as Americans should be spending in a time of crisis, not saving.
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Despite the grim economic situation, millions of American have no debt and live within their means. These are the people who should increase their spending.
“Spend to save” refers to buying items that will eventually help you save money. For example, buying a new home heating system will result in lower energy bills.
Most millionaires do not live in the lap of luxury. In fact, most millionaires have modest earnings, but save wisely and live well below their means.
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The current economic crisis is largely the result of banks literally running out of money. It is crucial that those who can afford it, continue to pay their mortgages and deposit money into their savings accounts, providing banks with much needed liquidity.
Spending within your means and putting money into the bank through mortgage payments helps the economy. However, hoarding money under your mattress for when the financial world collapses just further perpetuates the current economic crisis.
Banks are actually “hoarding” their billions in government bailouts. Banks are still very cautious in granting loans and mortgages, which ultimately is not helping the economy.
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The unemployment rate in the United States reached a staggering 9.5 percent in June 2009. Moreover, a growing number of unemployed Americans have simply stopped looking for jobs altogether.
Most financial advisers recommend paying off debt and investing in an emergency fund. Basically, you need to save to survive.
People don't have much faith in the American population. Respondents in a recent survey predicted that 75 percent of Americans would return to old spending habits.
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Most financial professionals have an optimistic view about American's spending and saving habits. In fact, 43 out of 46 financial professionals surveyed believe Americans have reached a new economic era of saving and spending wisely.
There are hundreds of little supermarket savings tricks. Did you know it's cheaper to buy the smaller potatoes in a bag rather than larger individual potatoes? Also, consider buying in bulk, as long as the item has a long shelf life.