Holiday Spending Guide for a New Economy
If you are watching the stock market, listening to the politicians in charge, and reading the popular press, maybe you are starting to build some confidence in our economy. After all, there is nothing wrong with having some optimism during difficult times. The important question is what you do with that optimism. The politicians in charge and retailers want you to convert that optimism into spending. Mr. ToughMoneyLove has different ideas.
First, while the stock market is often seen as a leading indicator of economic recovery, it by no means insures that recovery is imminent. And when I talk about recovery, I am referring to a boost in GDP that also triggers a decrease in unemployment. For most of us down here in the holiday spending trenches, having jobs we can count on is the key to our economic security. There is nothing indicating that a jobs recovery is imminent. Indeed, as recently as September, Larry Summers (Director of the National Economic Council) warned that unemployment could remain “unacceptably high” for years to come. This is also known as a “jobless recovery.”
Second, if you read deeper into what’s being reported and said in the media, you will find many voices predicting that we are now slowly emerging from the first dip in what will be a double-dip recession. As just one example, read what Paul Farrell has to say about how continued Wall Street greed is setting us up for a second meltdown.
Third, many believe that the negative financial impact of layering health reform and cap and trade legislation over our current situation will be too much for our economy to handle.
Do we really want to return to our old holiday spending patterns under these conditions? I don’t think so.
If Farrell and some of the others are right about that second economic dip, we should be preparing for it now, not spending while pretending everything is OK.
Of course, there is that argument that because our economy is primarily driven by consumer spending, we consumers need to kick-start it. My response: When Wall Street and the government reform themselves properly, I will do my part in rejoining the spending economy. I don’t see enough evidence of reformed behavior in those sectors.
So here are my suggestions for holiday spending this year:
1. Don’t spend. Give your time instead of stuff.
2. If you want to spend something, at least don’t spend that year-end bonus. If you are fortunate enough to receive one, put it into your emergency fund.
3. Control your spending with cash. Leave the credit cards at home. Our historical holiday spending patterns have caused us to charge stuff in November and December and then pay for it all through the next year. How about instead starting 2010 with a clean credit card slate?
4. Encourage your friends and relatives not to buy you stuff. Much of our holiday spending is triggered by a sense of obligation and guilt: If others give us something, we feel pressure to reciprocate. Mr. ToughMoneyLove says that 2009 is an excellent time to nip Christmas consumerism in the bud. If you want to give something relevant and useful, how about the gift of personal finance education?
5. Stay out of the stores. All of the displays and sales are cleverly designed to initiate an impulse buy. It can be difficult to resist. So keep yourself out of harms way. Personally, I have been offended by seeing Christmas displays in stores as early as October and even September. I’ve seen enough to discourage me from returning.
Please don’t take any of this the wrong way. Despite what my family and friends may have told you, I’m no Scrooge. I love the Christmas season and what it represents. I also enjoy gift-giving. But there are plenty of ways to enjoy the Season that do not require spending your precious money. So be careful out there folks. Our economic problems aren’t over. Even Santa should tell you that.