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Saving More and Spending Less

Black Voice News, News Report , Chris Levister Posted: Feb 06, 2009

Anita Rollings is an admitted spendthrift: a person who spends his or her possessions or money extravagantly or wastefully according to Websters Dictionary.

Thats me. I work hard, play hard and I dont plan on leaving a big piggy bank for my kids, the successful software engineer insists. But with the wheels falling off the economy and the threat of losing her job, Rollings is demonstrating what her husband Fred diagnosed as strange behavior. Seems the financial crisis has convinced the Rollings and countless other Inland families to try something a little different its called saving. But now this sudden change of heart is giving the economy a bad case of heartburn. Its good to save some money, but when everyone starts saving at the same time, it can lead to economic disaster. Goods pile up on store shelves, companies cutback on production and lay off workers. Then consumers pull back even more

Its a nasty little cycle. And all of a sudden many Americans are finding it habit forming. When I walk into Saks or Macys there is always plenty of eye-candy (shoes and clothes that is). Now instead of opening my wallet and dumping it on the counter for something I like. I go do I really need that? Rollings admits putting money into a savings account is akin to pulling teeth. You have to ask yourself do I save or pay down credit card debt.

Michelle Singletary, nationally syndicated columnist for the Washington Post and personal finance expert for National Public Radios Day to Day, says in good and dire financial times her advice is do both.

The answer is both. I talk about this daily and because many Americans are so obsessed with spending its hard to imagine saving. Youve got to do both, save for retirement and save for an emergency. If you have kids, save for their college education. But youve got to commit to paying down debt, Singletary says.

So youve got a little bit of money, divide it by however many pots you need to. Put a little in each pot every month. The thing is if you only throw money into your savings account and something happens and something will always happen, you will end up going into more debt to cover that emergency expense, she explains.

Say your car breaks down you have no savings and youre trying to pay down a credit card. What are you going to do use the credit card. There you go the vicious cycle starts all over again, she said. Consumers can no longer think they can borrow their way to prosperity. That is a fundamental change. The most basic way to save money Singletary says is in a savings account at your bank. Savings accounts come in two flavors, passbook and statement. Savings accounts are liquid, meaning you can get your money out at any time. The minimum balance required to open a savings account is usually quite low, sometimes just $1 or $5. Some banks require a minimum balance of $100, $300 or more to avoid paying a monthly maintenance fee.

The government says consumers should be buying more. But some economists say fear is a powerful thing. It quickly changes the economic picture. Now that so many Americans are saving, the trend could become self-reinforcing and might even break Americas thirst for spending, spending, spending.

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