Consumers need to avoid reckless spending

It’s been an eighteen-month long recession that consumers have made their ways through. Though they had many difficulties and struggles, they are now on the road to recovery. Some consumers are looking to jump into the world of spending and splurge. They aren’t a big slice of the population, but they are still there. Ethan Ewing, president of Bills.com, said, “It’s tempting for many consumers to throw open their wallets as a backlash against much of the restraint they showed throughout the year. But the best way forward for both individual and the larger economy is a balanced save and spend strategy that can sustain households while eliminating dangerous behavior.”
(See http://www.marketwire.com/press-release/Billscom-Consumer-Advocate-Cautions-Responsible-Spending-in-2010-1100344.htm)

Consumers target saving as a priority

Many consumers are looking to reward themselves due to making it through the recession. Despite their desires, though, most are holding back. They realize that haphazard spending is the worst thing they can do coming out of the economic depression. As a result of the difficulties, many consumers have renewed their commitment to saving—and not saving leftovers, but rather saving like their parents did: Making savings a priority and doing whatever it takes to reach financial goals. For those who want to start saving, here are some healthy tips to follow:

1. Assessments. The first step to saving is to assess the situation. Consumers need to be honest about where their problem issues are in terms of savings. Do they go out to dinner too much? Do they pay too much for insurance? Are they not stocking enough away for savings? These are all questions to ask during the initial stage of review.
2. Planning. After deciding what the financial goals are, next consumers need to start planning how to reach them. A realistic monthly budget should immediately come into play. It should take into account any planned yearly purchases like a new car, appliance or any other high-priced item. This is also where retirement and education funds should be planned for.
3. Execute the plan. This is where a lot of consumers get tripped up—when it comes down to actually sticking to the plan. If the plan was realistic, there should be motivation to keep it going. This is where a good financial planner may come in handy. He or she can explain the various methods available for reaching goals. Depending on goals, some consumers may be happy with a Certificate of Deposit, whereas others may need a 529 Education fund to serve their purposes. This is also where 401k accounts should be settled and the decision to put money into them consistently should be committed to.
4. Saving should be a priority. Saving for retirement should always be a priority. In today’s unstable economy, no one knows what tomorrow will bring. All that is known is that Social Security is quickly depleting and most likely won’t be available for much longer. That makes it crucial for consumers to take their futures into their own hands.

Saving for the future

Now that the economy is starting to stabilize, consumers are in the perfect position to reassess their goals. It’s an opportune time to create new plans to save. Any consumer who wants to save should first start with a good plan and a way to execute it. It will take time, but with some commitment and focus, financial goals can be reached.

Saving money is not as easy as it looks. Image from flikr.com

The government has always pushed for people to put money into personal savings. Now President Barack Obama has created ways that will actually make saving easier for workers.

Just like Personal Money store makes online payday loans easier, Obama has come up with these three ways for individuals to save money: auto-enrollment in retirement plans, issuing tax returns as savings bonds and putting unused sick or vacation days into 401k plans.

1. Auto-enrollment in retirement plans

This will not make retirement plans mandatory for employees, it will simply make it easier for employers to enroll their employees in the retirement plans. CNN Money explains:

To make it easier for smaller and medium-sized employers to automatically enroll workers into retirement plans, the administration will clear up some bureaucratic paper-work hurdles for employers to offer that option.

2. Tax returns as savings bonds

This one is pretty simple. Recently the government made it possible for tax payers to get their refunds deposited directly into their bank accounts rather than sending a paper check. Similarly, now tax payers will have the option of having their tax return issued in the form of government savings bonds.

Automatically converting your tax returns into government savings bonds means that your money will be automatically saved and it will earn a higher interest rate than it would at a normal bank. The longer you leave your money alone, the more you will make off of it.

3. Saving sick and vacation days

Many people do not use up their sick days or vacation days at work. For the vast majority, that means that they are wasted. The government now will make it easier for employers to convert their employees’ unused sick or vacation days into dollars invested in their 401k plans. Again, this isn’t a mandatory thing at all. Employers and employees have the option of whether they want to do it or not, it simply will be easier.

Why the extreme measures?

Before you start spouting off about big government and personal freedom, remember that all of these things are completely optional. No one — not employers or employees — is require to participate. However, the benefits of personal savings in relation to the economy are obvious to everyone, so as part of the effort to turn the recession around, the White House has come up with these ways to encourage and facilitate personal savings. Just in case you’re in doubt about whether this help is necessary, here are some statistics from CNN Money:

Even among those with savings in the bank, the nest egg is relatively lean. Of workers 55 years or older, about half have less than $50,000 in savings, excluding their homes and pensions, according to the Employee Benefit Research Institute.

Some of these measures will be very lucrative for people. Unfortunately, these only help people who have jobs and qualify for tax returns. Saving money and investing wisely is very important, and I for one am glad to see that the government isn’t just talking about the fact that people should save money, but is actually taking steps to make it easier. I hope we will see more measures like this in the future, and that we can find a way to help people who don’t have 401ks and tax returns.