Help Yourself, Not The Economy

There is a tug of war going on over your money right now.  When you sit down and think about it, you know that you should save your money, pay off your debt and provide for your future.  Unfortunately there are other forces coming after your money.  Not only do you have to deal with the regular advertisements that do everything possible to get you to part with your money in exchange for a shiny new gadget, but now you have to deal with an even bigger force: the U.S. government.

empty-pocket

Photo by stuartpilbrow via Flickr

The U.S. government has declared war on saving since the recession began.  Why?  Because our economy is dependent on consumption and savings means that people are not consuming.  While saving would be very positive for our economy over the long term, it is disastrous for an economy structured like the American economy.

Incentive to Spend

The government has enacted multiple programs to try and get you to spend your money.  Cash for clunkers was an encouragement to spend money on cars, the first time home buyer credit was an attempt to get you to spend money on a house, Cash for appliances is a new program to get you to buy new appliances.  Whether you need another car, a new house, or a new appliance is irrelevant.  Our leaders need you to spend money so that the economy gets a short term boost and they can potentially get re-elected.

Government incentives to spend money are a terrible plan in my opinion.  While I wish the government would not be involved in the economy, if they are determined to do so, why not incentivize job creation through something like “Cash for Jobs”?

Help Yourself

Unless you have been planning on buying a car, home or appliance for some time and have saved for it, I strongly encourage you not to take advantage of these programs.  Instead, help yourself, and fund your retirement or your emergency fund or get rid of your current debt.  These are the pathways to financial security, not a shiny new car.

Unless Americans start to get their personal balance sheets back in order, many Americans will not be able to fund their own retirements.  The retirement that many envision will simply be unattainable for many people due to the lack of financial planning throughout their lives.  Don’t let that be you.  Start today and put money away towards your future.

Saving Will Help The Economy

Unfortunately, there is a common consensus that we need to get people to spend again to save the economy.  The reality is that we need people to save so we can save the economy.  Our economy has structural flaws and needs to be restructured.  A drastic drop in consumption would force this restructuring.  While there will be short term pain (a bad recession), a restructured economy based on savings and production will provide the opportunity for sustainable growth over many years.

The American economy has systemic and structural issues not because of a lack of spending but because of too much spending.  Be smart and start saving money.  Lots of it.

Americans need to view their money as capital, not as a ticket to spending.  Their capital can be allocated in multiple ways.  It can be allocated towards their future, towards investments, towards necessities (such as food and shelter) and it can also be allocated towards lifestyle.  The problem is that Americans have been allocating their capital towards speculation and lifestyle for far too long.

Remember, your spending will help the U.S. economy this year and next, but it won’t help you.  Help yourself, not the economy.

About the Author

By , on Nov 17, 2009
Kevin
Kevin is the writer behind 20smoney.com. 20smoney.com focuses on aggressive investing, developing income streams, money management and more with advice targeting 20-somethings. You can read more about his pursuits of online income and financial freedom.

Leave Your Comment (7 Comments)

  1. Julie Green says:

    I agree with the article too. One of our problems in this country has been overspending. While this tough economy has been so difficult for so many, it has been a good reminder to all of us to pay ourselves first – retirement plan deductions, paying down debt, and also college savings plans and “rainy day” funds. If one finds they are unable to pay themselves, because they are paying everyone else, then it is a clear indicator they have over extended themselves and need to reign in their spending. Run your finances as you would if it were a business–if you couldn’t pay yourself a salary and invest in the company, you would go out of business quickly. If we all invest in our own financial security, our country will be better off in the long run.

  2. Gaston says:

    We have contacted several of our favorite stores and have learned that business is going from bad to worse.

    At least in California, there is a literal army of bureaucrats collecting from the small businessman, even if there is nothing to collect from.

    One small retailer I know has a modest store in an even more modest shopping mall. He built all of his counters by hand, since he couldn’t afford to do anything else. They are very nice.

    The other day, he received a call from the use tax people. They told him that he had very nice counters. He said thank you. They said, because they are nice, you will have to pay us to use them.

    My friend told them he had no business and no money. But, the clerk told him that she had never heard that a business had to make a profit to pay a use tax. The bill has now arrived.

    My friend has no money. Sits in his store day after day with his nice counters and no customers.

    And, the federal government passes Health Reform which he cannot afford for his own family. Wall Street and the banks continue to celebrate and grant themselves bonuses while he starves. He is on the verge of bankruptcy and has already lost his home.

    Where is his bailout.

  3. kenyantykoon says:

    while i am not American, i have been closely following this economic turmoil very closely and i must say that it is troubling because looking at the reasons that caused the recession in the first place, i see that other less developed countries like my own are in that same line. What i really wonder is that why our leaders cannot seem to look that some things will not work. Instead of learning from the mistakes of other economies looking for other solutions, our leaders seem to by trying to mirror everything that the developed world is doing. This aggravates me to no end.

  4. A great post!

    Imagine a world in which we were not a Nation of conspicuous consumption. If millions had bought houses they could have afforded with out interest only loans and balloon payments and debt load.

    If we were a Nation of savers the current economic crisis would have never occurred.

  5. I love your take of the government’s attack on savings. People have to remember that the government is a business. As much as they try to help people they need to make money. With the enormous deficit they need to make more money. You need to be selfish. You need to worry about yourself first. Do your part and pay taxes (as little as possible?) but take care of yourself. Great message.

  6. Jenne says:

    A good economy is one where its citizens do spend money…after they have planned for their retirement, paid their bills, and put money in savings. Spending should be actual discretionary money. The economy cannot survive with people spending more than they earn or it will always fail.

  7. Mike says:

    Thanks a lot for the link!

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