Saturday, August 13, 2011

Consumer Spending, Consumer Saving, Consumer Confidence

Let me start off with a disclaimer: my family is comprised of savers, not spenders. According to the media and economists, we are bad for the economy. They feel that the economy is primiarily driven by consumer spending.

What is it we need to buy? With age, our buying patterns have changed. We really don't need anything. We have a house (paid for), multiple cars (all paid for -- none newer than 2005), furtiture (paid for), clothes (paid for). We spend our money on insurance, food, and utilities. We eat out once a week at a moderately priced restaurant (rarely spending more than $10 per person). We have no credit card debt -- pay it off monthly (credit cards are for convenience, nothing more).

Our biggest expense these days is college tuition. Our three oldest attend state schools. They all work. We cover their tuition; they cover everything else. We disagree with those that believe children are entitled to a free education and do not need to make their own financial contributions.

I have little concern of people's spending patterns. However, from my observations in helping people move or closing up someone's home after a death, people spend money on some really useless things. Some much of this stuff goes in the trash.

We are savers. We would much prefer to save money than spend money on things we really don't need. We always consider the need vs want metric. Rarely to we splurge. Christmas and birthdays are holidays, not occasions to spend excessive money.

We always have had a pessimistic opinion about the financial future. When markets flurish, we are unexpectedly happy. We opt for a year's supply of cash -- the rainy day fund. All purchases are made with cash or credit card that is paid off that month. We do not pay interest.

A headline from today is: "U.S. Consumer Confidence Drops to Three-Decade Low." This is not necessarily a bad thing, especially if it forces people to save more and make more prudent buying decisions.

As consumer spending declines, the economy will right-size, if only the government would allow it to.

A decline in consumer spending and confidence is a movement to a more normal baseline. Despite the numbers, I see lots of money being spent today. Movie theaters are full, restaurants busy, athletic ticket sales good, smart phones and pads ubiquitious. We are living pretty comfortable lives.

Where we lack are personal freedom from government opression and moral decadance. Subjects for another time.

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