Personal Finance Advice

While a lack of liquidity in the credit markets are providing a natural break in spending, many Americans are also tightening their belts with the prospects of recession on the horizon.  Consumer spending has slowed considerably over the last few months and it’s having a noticeable effect on the economy.

It is unfortunate that it takes this kind of situation for people to finally start thinking about saving money.  The amount of debt we have in our society is ridiculous.  For many people, their idea of budgeting is the limit on their credit cards.  The government is no better with the national debt at $9 trillion and rising.

It can be difficult to save money in our over commercialized society.  We are being constantly bombarded with marketing spam at every level, when you watch television or surf the web, we even get it from text messages on our cell phones now.

As ridiculous as it sounds, the current economic climate actually seems to encourage more debt.  Rising inflation and low interest rates greatly favors debtors rather than savers.  This can be misleading however, since our economy doesn’t exist in a vacuum.  With the dollar falling to record lows, the relative wealth of our economy compared to the other nations of the world is taking a serious beating.

It is really the savings rate of a society that builds up wealth over time for an economy.  Over the years, our society’s savings rate has dwindled and the accumulation of debt has grown to epic proportions.

As much it would help the economy for us to spend our way out of a recession, is that really the best thing for us as individuals or as a society?  Debt and credit can be powerful tools to help leverage your financial situation, too much of it however can be disastrous.  You need only look to our highly leveraged financial system to see how that is working out now.

This report on MarketWatch has some troubling statistics about Americans and retirement planning.

“roughly half of all working Americans don’t participate in a retirement plan or don’t have an employer-sponsored plan in which to participate.”

“retirees are living on roughly one-third of their preretirement income. And that’s a far cry from the 70% to 80% income replacement experts suggest Americans need to maintain their preretirement standard of living.”

If the only retirement strategy you have at this point is a plan to live off of social security, you and many other Americans are in big trouble.  With the baby boomers expected to bankrupt the social security system sometime in the next 20 years or so, subsequent generations must be especially cognizant of their retirement planning.

Even people who are actively saving for retirement aren’t saving enough.  Healthcare costs are rising so astronomically it will be difficult to maintain a reasonable standard of living as you grow older. 

However, you still have time before the end of the year to contribute the maximum allowed for both your IRA and 401K plans.  For individuals over 50 years the IRS has a provision to allow you to “catch up” on retirement that allows you to contribute an additional amount over the normal allotment for retirement accounts.

The holiday shopping season started off strong with a busy Thanksgiving weekend but since then many retailers have reported that traffic has slowed considerably.  It is also difficult to quantify how much of an effect the toy recall is having on sales.

At this point it’s shaping up as a disappointing quarter.  However, retailers are still holding out hope for a late surge in holiday sales.

Contrary to popular belief the day after Thanksgiving isn’t the busiest shopping day of the year but rather the weekend just before Christmas.  So, if you’ve been procrastinating don’t worry because you’re not alone. 

At least that’s what retailers are hoping and with them desperate for your business, good bargains can still be had.  Many savvy shoppers also realize that some of the best deals can come after Christmas is over.  Whether it is better to shop toward the beginning or end of the holiday season is still a matter for debate.

However, there are some doubts that this late surge will occur this year.  Consumer confidence has taken a sharp hit the last few months with growing concerns of a recession as well as rising food and energy prices.

Many analysts will be studying these holiday sales figures extensively since consumer spending has such a large impact on our economy.