Does your family have a personal financial plan to survive an economic slowdown?
Managing Our Family Finances During A Jobless Recovery
I suppose we have all heard the economists’ theory of how consumers need to spend their way out of a recession. The argument here is for consumers to keep spending in order to jump start the economy. Maybe that is the theory, but in reality how many of us were caught off guard by this particular downturn? Too many. And how many of us can really afford to spend right now?
I belong to an oilfield family which has certainly lived through downturns before. When the patch is busy, we have very little time as a family unit to make large financial decisions. We have adjusted our lifestyles and family spending habits more than once. But, thankfully we also learned our lessons years ago — to budget our money, to start saving money, to avoid spending beyond our means and to build a substantial emergency fund.
Saving Money Is The Current Priority
Knowing that spending may reignite the overall economy and that we’re facing low interest rates, do you intend to increase your spending at all? While the low interest rate environment has been kind to my family as we worked to refinance our home recently, it’s not enough incentive for me to think about making more purchases at this time. For instance, I’m not sure if it makes sense for us to do a used car trade in right now given that our cars are still fully functional.
I do understand the theory — that lower interest rates are intended to spark spending by encouraging us to borrow more. But many of us consumers won’t really care about these low interest rates if we’re insecure about our job situations. Experts are being quoted as saying that the current unemployment rate and general consumer confidence are influencing consumer spending at this time. I can certainly attest to this myself: other families around me have had to cut back heavily on their expenditures in recent months due to job concerns.
There is certainly evidence all throughout the nation of households having lived beyond their means during the past 5 years, of households buying up every “toy” on the market. As I take a look outside, I see trailers, ATV’s and oversized trucks littering the roadside with “For Sale” signs on them. How many are a week or two from being repossessed by a financial institution and putting a not so nice slant on the owners’ credit ratings? That said, how many of these families are going to be willing to make major purchases just because interest rates are low? Certainly, not many. Many of these families are struggling to regain their financial footing as it is, so I’d expect cost cutting to be their priority at this time.
I see friends taking much more time before making any kind of financial decision, and not just big ones. I see them cutting back on frivolities like having lunches out. Eighteen months ago a group of 5 of us would meet weekly for lunch, taking turns to treat the group. Now we are down to three people once a month who have agreed to go dutch.
A couple of years ago, you’d see us hop on a plane for Las Vegas or the West Coast without thinking much of it. In light of our unknown work prospects, we have scaled things back this time, and now look upon a road trip as a feasible vacation plan. Maybe this way we can ensure that our kids can continue to play hockey and that we, as a family, may be able to take a second short trip at Christmas. Long story short, my conservative household is not taking the financial responsibility of saving the economy, but instead, of keeping our personal finances under control.
Contributing Writer: Carol H.