After more than four years of gloomy fiscal news, some economic advisers are pointing to a brighter future.
But while the outlook may appear rosier to some, Christian financial experts caution this isn't necessarily the time to plop down a credit line to buy a mansion, gas-guzzling car or two-week vacation to an exotic locale. Rather than ramp up spending on personal pleasures, it might be a better time to pay off existing debt, bolster savings and remain faithful in charitable giving.
Having experienced the worst economic doldrums since the Great Depression, many American consumers have learned the hard way that easy credit is a trap, especially those who faced home foreclosures. Some consumers found they couldn't pay back equity lines of credit. Others borrowed from retirement savings, unable to replace the funds.
Have the lean years taught consumers not to overspend on items they can't really afford, and not to yield to the lures of impulse buying? Although the personal savings rate has rebounded from a negative figure in 2009, the current savings rate is only about half of the 8.3 percent five years ago.
"We are still at unsustainable levels of debt," says Kregg Hood, senior vice president of AG Financial Solutions in Springfield, Missouri, and author of Escape the Debt Trap. "We are far from being out of the pit. The conditions that got us into trouble really haven't changed that much."
Financial author Carolyn Castleberry, founder of WomenSaveMoney.com, agrees.
"A lot of people are still struggling," says Castleberry, who is based in Virginia Beach, Virginia. "Many real estate short sales continue to occur. I think it's going to be another couple of hard years."
Reducing Spending
It doesn't help when certain costs, from gasoline to college tuition, seem to climb year after year. But Hood and Castleberry explain that households can take measures to offset rising prices.
While it's impossible to avoid spending money in certain areas - food, clothing and gasoline, for instance - those costs can be lowered. Dining out less often can decrease a family's food costs tremendously. Buying clothes off-season prompts huge savings. And consolidating trips for errands reduces gasoline spending.
Hood has devised a "money margin matrix" formula in which every expense is either essential or discretional, as well as either fixed or variable. By examining where money has been allocated the past two months, Hood says consumers can delay, reduce or delete certain spending. While people need to keep paying their mortgage, student loans and car payments, there may be more leeway with other spending.
"It's not just about reducing expenses; it's about creating margin," Hood says. He recently switched insurance companies and is now saving $180 a month on combined home and car coverage.
Keeping track of spending sometimes highlights unhealthy patterns.
"You might find that you are spending money mindlessly or you are spending too much money in one area," Castleberry says. For example, a $50 monthly gym membership that goes unused payment after payment should be ditched. She notes that a worker who switches to bringing a lunch every day instead of going out to eat can save up to $200 per month.
Simple ways to save a few dollars add up: stopping the habit of buying a latte every day on the way to work or purchasing bottled water for daily consumption. Keeping a landline phone may not make sense if a person talks primarily on a cell phone. Placing a daily mileage limit on driving might be as beneficial to the pocketbook as placing a calorie limit on food intake.
Castleberry says people must ascertain their current financial status by determining their debt-to-income ratio.
"Even though it seems daunting and scary, figuring out your true net worth is one of the most freeing things you can do."
Rather than live in fear, Castleberry says a person who knows his true fiscal standing is able to make better spending and planning decisions.
"A budget is like a diet for your finances," Castleberry says. "If you're going to lose weight, you have to know what your calories are."
Technology has been a new way this generation spends a great deal of money. But high-tech gadgets need not be expensive. Castleberry says she found a slightly used iPhone on eBay for one-fourth of the price she would have paid for a new one.
When looking at satellite or cable television systems, it's best to know what deals both are offering and to use that as leverage.
"Any time there is competition, there is a shot at a better deal," Hood says.
Some companies offer deep discounts when bundling phone, TV and computer services.
Credit Card Crunch
Castleberry recommends carrying only two credit cards: one that gives reward rebates and is paid off every month, plus another for emergencies, such as unexpected medical bills. Castleberry notes that people invariably pay higher interest rates on debt than they can achieve from savings accounts, so they in essence are losing money by carrying a balance.
Hood also believes a couple of credit cards are permissible if the user is able to wisely negotiate rebates for transactions and if interest charges don't pile up on revolving credit. If a consumer goes a month without paying off the balance, it's time to put the plastic away, Hood advises.
"The dumbest thing people can do is carry credit card debt," Hood says. "The interest rate is always high. People must loathe credit card debt."
"For some people, credit cards are like alcohol to an alcoholic," Castleberry says. "Those who can't resist charging need to get rid of the cards."
The financial experts also express caution about the growing trend of grocery stores, discount chains and home improvement centers offering credit cards giving a certain percentage discount or number of points for use.
"Their ultimate goal is not to save the consumer money, but rather to get the shopper to make more transactions," Hood cautions. "Consumers need to ask if they really would have bought the products anyway."
In addition to short-term and long-term savings, Hood advocates "permanent" savings: giving to the Lord's work.
"It's not that we can buy God off," Hood points out. "We don't give to get, but rather out of love and obedience."
"Our true security is in God, not finances," Castleberry says. "It's easy to be frightened. But our hope is in God."
Author: John W. Kennedy, Pentecostal Evangel
