Question: A friend of mine said she wasn’t buying holiday presents this year, which makes me wonder. Should we be spending as our government would like us to, or should we be saving as you suggest?
Answer: I asked John Olienyk, professor of finance at Colorado State, to help answer this question. John says that the answer for each individual and family depends mainly on two factors – whether you are reasonably sure of continued employment and if your debt load is balanced. Experts suggest that if your debt is 15 percent or less of your net monthly income, you are in a comfortable range. If your debt is higher than 15 percent, this is the time to sit tight and refrain from adding additional debt.
Discussions about a slowing economy and recession are based partly on economic factors and partly on psychology. Where do we expect to be in the future? If, as a country, we stop spending, taxes on sales of products drop, jobs are cut and many people suffer from reduced income.
Considering the situation in a personal light, how should each of us address this issue? John suggests that if our jobs are secure and if our debt is reasonable, then we should continue our lifestyle much as it has been.
This is a time of bargains for careful shoppers. Zero-percent financing on automobiles, computers and big-screen televisions is a valuable incentive if those are items you’d be buying in the next couple of years anyway. However, paying more for an item to get low financing may defeat your purpose, so being a careful comparison shopper is an important strategy.
Always shop at least three places to compare prices. For expensive items, do your homework first by reading consumer magazines and searching the Internet for information. Don’t buy more features than what you’ll use. Have a list of questions that will help you make a good decision. Don’t be intimidated by a hard sell. If you feel overwhelmed, walk out of the store and go home.
Write down prices and features and compare. Don’t buy emotionally. Enlist the help of your family – some members will be better at comparison shopping than others. Use their talents.
"This is a good time for some ‘patriotic’ spending for those who can afford it, but it is not patriotic to overextend yourself and end up in bankruptcy," John added.