Saving Versus Spending

Earlier in the year, a survey by Nielsen Research asked American consumers how they would spend this past spring’s economic tax rebate checks.  While government officials were hopeful the checks would stimulate the economy, 69% of respondents to the survey said the next 12 months would be either a bad or “not-so-good” time to buy the things they want or need.

On our show Erica Sandberg made an interesting observation.  While our society tends to promote a material culture of “spending, spending, and more spending,” both society and the media don’t discuss the importance of saving. 

With the average consumer receiving little or no education about the importance of saving and how to save, American culture has set many people up to fail during a recession.

This led me to a question – during a recession, is it more important to save or spend?  

Is it important to save to continue to build up that 6 to 12 month supply of resources for tough times, or is it better to invest in some of the financial opportunities (decreased prices of homes anyone?) that can arise during a recession?

According to Gabe Graumann, creator of the blog MoneyTalkWithGabe – the answer is both. 

As Gabe explained it, the ideal goal is to be saving and spending in parallel.  However if you have a large amount of debt – you shouldn’t be spending.  Pay off your debt first. 

That said, if you’ve done a good job positioning yourself financially and have some liquidity you can direct toward an investment – do it. 

According to Gabe, you're going to get the best deals on things like real estate and underperforming mutual funds.  This allows you to buy low and reap some profit over the next four or five years.

What are your thoughts?

• Do you think more people should be spending to help the economy right now?
• Are any of you nervous about your savings, given the current instability within the banking industry?
• For our financial coaches, what are your typical recommendations when it comes to spending or saving during a recession?

Tom Floyd
CEO
IEC: Insight Educational Consulting
Specializing in Management Consulting, Change Management, Workforce Performance, and Employee Development

Coaching for Financial Success in a Recession

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