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Question: A friend of mine said she wasn't buying
holiday presents this year, which makes me wonder.
Should we be spending as our government would like us
to, or should we be saving as you suggest?
Answer: I asked John Olienyk, professor of finance at
Colorado State, to help answer this question. John says
that the answer for each individual and family depends
mainly on two factors – whether you are reasonably sure
of continued employment and if your debt load is
balanced. Experts suggest that if your debt is 15
percent or less of your net monthly income, you are in
a comfortable range. If your debt is higher than 15
percent, this is the time to sit tight and refrain from
adding additional debt.
Discussions about a slowing economy and recession are
based partly on economic factors and partly on
psychology. Where do we expect to be in the future? If,
as a country, we stop spending, taxes on sales of
products drop, jobs are cut and many people suffer from
reduced income.
Considering the situation in a personal light, how
should each of us address this issue? John suggests
that if our jobs are secure and if our debt is
reasonable, then we should continue our lifestyle much
as it has been.
This is a time of bargains for careful shoppers.
Zero-percent financing on automobiles, computers and
big-screen televisions is a valuable incentive if those
are items you'd be buying in the next couple of years
anyway. However, paying more for an item to get low
financing may defeat your purpose, so being a careful
comparison shopper is an important strategy.
Always shop at least three places to compare prices.
For expensive items, do your homework first by reading
consumer magazines and searching the Internet for
information. Don't buy more features than what you'll
use. Have a list of questions that will help you make a
good decision. Don't be intimidated by a hard sell. If
you feel overwhelmed, walk out of the store and go
home.
Write down prices and features and compare. Don't buy
emotionally. Enlist the help of your family – some
members will be better at comparison shopping than
others. Use their talents.
"This is a good time for some ‘patriotic' spending for
those who can afford it, but it is not patriotic to
overextend yourself and end up in bankruptcy," John
added.
For more information, contact your local
Colorado State University Extension office.
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