Image: istockphoto

Consumer confidence has taken a hit in recent months because of stagnant wages and growing unemployment, two factors that have raised worries that consumers will cut back spending in the coming months.

Analysts also worry that consumers will grow reliant on government programs, holding onto their money when no such programs are available.

These figures have caused analysts to predict that consumers will spend less aggressively going into the holiday season, which may prove to be disastrous for retailers that rely on strong holiday sales to get through the rest of the year. However, inflation did not rise as much as expected, which is a relief to policymakers.

Post from: EveryJoe

Consumer Spending Fell in September

1. Cash for clunkers: There has been some debate over the success of Cash for Clunkers, but there is no denying that some of the spending that might have gone to retailers went instead to down payments on cars got for screaming deals. (This really is a good time to buy a car if you had been thinking of getting one in the next six to 18 months.)
2. Concern about credit card debt: The dip in retail sales also illustrates the changes in spending habits. Many have become concerned about the amount of debt they have (especially credit card debt), and are trying to save more and spend less. Of course, if you’re concerned about debt and just bought a new car because of Cash for Clunkers, naturally you’ll curb spending in other areas so that you won’t be even more burdened.

Of course, whether or not we will see permanent changes is up for debate. But it is encouraging that people are at least thinking about their spending and trying to prioritize. Being able to prioritize is an important part of personal finances, and improving your financial situation. If one lesson is learned from this recession, I hope that it is that you need to priortize your spending, and live within your means.

Image source: Wikimedia Commons

Post from: EveryJoe

Retail Sales Illustrate New Spending Habits

• Combat rising unemployment.
• Stave off more foreclosures.
• Keep the financial system afloat.
• Spur more consumer spending.
• Help Americans meet ends meet in an effort to arrest the decline of the middle class.
• Prepare our national finances for the future.

That’s a pretty tall order, and I don’t think that it can all be done — at least not by one person. I don’t even think all of it should be done. I’m hopeful that Obama’s plans to improve infrastructure and develop renewable energy will both provide jobs and prepare us for the future. However, I’m not overly fond of the idea of encouraging a return to consumer spending. I’d rather see our economy overhauled so that it is less dependent on debt-fueled consumerism.

What do you think are the challenges Barack Obama faces on the economy? And can he overcome them?

Post from: EveryJoe

Barack Obama Prepares to Make History — And Tackle Challenges of the Economy

Part time jobs on the rise as the economy weakens

One of the easiest ways for employers to save money is to cut full time hours to part time hours. Not only does this mean less money in wages paid, but it also means that benefits (especially health care) no longer need to be paid, either. Here is what Investing Blog points out about the information from the Bureau of Labor Statistics:

Even more interesting from the BLS report is that only 1.5 Million are working part time because that is all they could find. Most are working part time for jobs that were previously full time.

Most of the 5 million people working part time are doing so because their hours have been cut from full time. True, having a part time job is better than having no job. But these folks are going to be subject to a couple of problems:

1. Dramatically increasing health care costs, since they no longer have insurance to help. (Or they have to get more  expensive individual plans.)
2. Increased risk of foreclosure, since the mortgage payment may be harder to make on a part time salary.
3. Increased risk of mounting debt as they turn to credit cards to make ends meet. (Combine this with credit card companies’ propensity to lower credit card limits right now, and problems really start to become apparent.)

If the goal of the government is to spend our way out of recession with the help of consumerism, the current conditions are going to be hard. Honestly, if the government is serious about the idea of throwing billions (and trillions) of dollars into the economy to jump start consumer spending, its best bet isn’t more investment in corporations and tax cuts. It’s best bet is massive individual economic stimulus that gives people enough money to cover their obligations and then do a little spending.

Post from: EveryJoe

Full Time Jobs Devolving Into Part Time Jobs

Some of the things I like about Barack Obama include his quiet confidence and his talk of unity. I also like how he lays out the problem, and talks about a solution. I’m seriously hoping that the vast amounts of money that he plans to spend on economic stimulus will be more than just throwing money at the problem. And it certainly sounds like President-elect Obama means to try to make thoughtful, useful expenditures. He focuses on:

• Infrastructure.
• Health care reform.
• Renewable energy.
• Tax cuts.

My favorite points are infrastructure and renewable energy. Investing in these items will actually help us prepare for the future, as well as put people to work and give them a chance to help stymie the foreclosure problem. I like the idea of actually investing in our infrastructure and developing renewable energy. These are vital elements to our national security, as well as our economic vitality.

Tax cuts are nice, and I am glad that they are expected to be aimed at helping the middle class. It’s more of a “trickle up” approach that will hopefully work better than the “trickle down” approach that has been dominating so far. It would be nice, though, if our leaders, rather than trying to encourage us to spend the money, would advise us to pay off credit card debt and make wise investments, rather than engaging in another round of consumer spending. And, of course, I don’t think that Obama’s health care reform goes far enough.

At any rate, the address was reasonably encouraging overall. But we’ll have to wait until later this month, when the pork starts being inserted into the economic stimulus bill and battles erupt as the new administration comes in.

What do you think of the economic stimulus plan laid out by Barack Obama?

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What Do I Think About the Economic Stimulus Plan From Barack Obama?

Pham’s company aims to help consumers do just that: Be careful. “When you already have debt, and you decide to use a credit card anyway, you want the one that costs the least amount of money. It’s not about rewards at the point, because anything you charge will likely negate any savings you might have had.”

But BillShrink.com isn’t just about finding a card with a lower interest rate. Pham tells me that the especial purpose is to help consumers who pay off their balances each month find the card that maximizes their rewards. “We have you tell us your top spending categories, and your habits, and convert the rewards you could earn into a dollar amount. That way you can compare credit cards to see which is most worth using.”

The economy and credit card rewards

“Right now,” Pham says, “many people are looking for cash back cards. There’s less airline redemption and more interest in getting money back. It’s due to the recession. People want something, like money, that they can use, rather than airline miles that can be difficult to redeem.”

He also says that for those looking to maximize their credit card rewards in this economy can benefit from sound habits this holiday season. “Most people earn their points during the holidays,” Pham points out. “For those who are responsible and pay their balances off each month, this is the time to earn optimal cash back. If you’re going to spend hundreds — or even thousands — of dollars, you deserve the right card to maximize your savings and cash back.”

My take on BillShrink.com

Personally, I like the idea of BillShrink.com. I enjoyed putting in my credit cards and seeing which were really not as good as advertised. I also got some solid recommendations for upgrades. The other thing that is nice about  BillShrink is that the options given are those that you are most likely to qualify for. “We aren’t going to be giving you a recommendation for something that your credit score doesn’t allow you to qualify for,” Pham insists.

And, while I don’t advocate going on huge shopping sprees with a credit card, I can see where BillShrink can help those in debt to find low interest credit cards (what’s left of them) for balance transfer purposes. I also like the idea of maximizing your rewards. In this economy, every little bit helps.

Disclosure: I do not work for BillShrink, nor have I been paid by the company or offered gifts or any other compensation. I conducted an interview with the CEO of the company, Peter Pham, at his request, and visited the Web site.

Post from: EveryJoe

Credit Card Christmas? Make Sure You’re Using the Right Card for You

That was enough.

This year, it appears that others feel that we’ve had enough of Black Friday as well. Some people consciously choose to stay home — 8 million of them (according to the Huffington Post) are people who did the Black Friday thing last year but have had a change of heart. And that may affect the stock market on Monday.

The preliminaries are in, and it appears as though consumer spending on Black Friday is down. The crowds of people aren’t much lower, but penny-pinching is “in.” Unfortunately, the crazy, animal behavior that Black Friday is so famous for remains. You’ve probably already heard about the trampled people and those shot arguing over a toy. A toy. And this year, there was extra incentive for the doorbusters because, otherwise, how will that flat screen TV or laptop or other hot item that is *needed* be affordable in this economy?

I’m glad that I didn’t see any bad behavior in my two Black Friday excursions. For the most part, I just saw people trying to get deals and getting their shopping done en masse. Most people were considerate, and we “made friends” and joked while on line. I know this isn’t the case everywhere. And it may not have been the case if we had sacrificed sleep for doorbusters at 4 a.m.

What have your Black Friday experiences been?

Post from: EveryJoe

Black Friday and Consumer Spending

Indeed, everything our leaders have been doing, in the name of fixing the economy, has been aimed at increasing consumer spending. And now it looks like they are down to the final straw. Witness the latest TARP program, which is aimed specifically at boosting consumer spending fueled by debt.

TARP to encourage investment in consumer debt-backed securities

The latest TARP plan offers up to $200 billion in special loans to investors who will then buy consumer debt backed securities — securities based on credit card debt, student loans and auto loans. The idea is to encourage investment in these vehicles so that lenders will loosen their recently-tightened requirements and then allow more lending to take place. Consumers will borrow more so that they can spend, spend, spend to save the economy and our American way of life.

Regular readers know that I am in favor of a radical shift from a debt-based economy to one that is more stable (though less sexy in terms of growth) and based more on disciplined spending within our means, saving and exporting technology, goods and services to other countries rather than being the world’s biggest consumer.

Unfortunately, our leaders still persist in pursuing an economic model that is not good for the individual personal finance situation. It is a model that insists that we all be in just enough debt that we keep making interest payments — but that we never quite escape and we never quite go under.

Does anyone else think there is something wrong with this?

Post from: EveryJoe

Fed, Treasury Ready to Boost Credit Card Debt-Fueled Consumer Spending

The thought that luxury spending might extend to such things as organic food occurred to me yesterday when I got an email from the local organic market explaining that the store was closing later this month. Since I live in a small town in the middle of nowhere, this is a blow to me. We don’t have chain organic stores. Sometimes the other grocery stores have a few items, but there are a number of things that I like that I can’t get anywhere else.

At any rate, the reason the store is closing is that, after three years of steady growth, customers have dropped off. In these economic times, the more expensive organic food has become a luxury. And my local market saw a sharp decline in sales, culminating in a need to take the loss this tax year and get out.

So, next week we’ll be heading to the organic foods market for the last time. Unfortunately, the fact that we’ll be finding some great deals doesn’t do much to make us feel better.

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Organic Foods: Casualty of the Economy

• Furniture
• Electronics
• Appliances
• Clothing (men and women)
• Footwear

It appears that the economic slowdown is really affecting spending right now. For the most part, we’ve mostly cut back on eating out and we’ve decided to spend less on gifts for each other this year. And our impulse spending has been minimized.

We are looking for ways to cut back, since one never knows what’s going to happen, and we want a cushion — just in case. Between the nature of my freelance writing job, and the fact that my husband’s salary is paid through funding at the school (university budgets are being cut all over), we could see an income drop.

It’s always better to be prepared.

Are you cutting back on spending? Are you preparing for possible economic difficulties?

Post from: EveryJoe

Spending on Consumer Luxury Items Down