Should You Spend During Hard Times or Save Your Pennies

Many of the best personal finance blogs I read on a daily basis, including Get Rich Slowy (which Money Magazine called the most inspiring money blog today), The Simple Dollar, Free Money Finance, and Money, Matter, and More Musings focus on how to save money or lead a frugal life, however we often hear via the media that the US economy is tanking and that increased consumer, business, and government spending will be the only way back to more prosperous times.  The logic is that some group needs to spend in order for the economy to grow, or with the current economic crisis, stabilize.  And when consumers don’t spend money on cars and LCD TVs (because of lack of funds or because they are simply being conservative) and corporations don’t sign big contracts for services or equipment, the US economy grinds to a halt.

The problem with the above scenario, at least for the average consumer, is that they are being told to behave in two completely and contradictory ways.  On the one hand, our market system in the US is dependent on spending and the flow of the capital, so US consumers are encouraged to:

– Spend money and save very little and borrow and leverage credit.

Conversely, we’re also told by shrewd personal finance types, mom and dad, and anyone who uses common sense to operate in the world to not:

– Do not use credit to buy things and save as much as possible and live below your means.

So, how should you behave?  Do you want to the help the US economy or help yourself and your family (and your wallet)? 

The answer to me is pretty clear and it shouldn’t take an economic recession and bailout program to remind the American consumer that they should spend less, save more, and be very cautious about leveraging large amounts of credit to fund home and car purchases.  So, stay the course and remember to adhere to basic personal finance rules:

– Save as much of your take home pay as possible.
– Live below your means.
– Think about how you want to be living in the future and not how you want to live in the present.
– Happiness does not scale with material items or immense wealth (don’t take my word for it, here’s a press release from the folks at Princeton University).

Note: The views expressed herein are solely my own and should not be attributed to my employer in any way. This site is not maintained utilizing my employer’s resources or on company time.