What is the overall impact of increased savings? Since more people are saving because of uncertainty, even those who are not having financial problems. What does that do to our economy?

Saving is imperative and for decades, Americans did not save enough. Now that the tide has turned and people are saving more there is a battle between the people who save and those who are financially fit but more tightfisted with their cash. Americans are spending less. This of course also includes those who are out of work and not contributing to the economy in tangible ways – other than for food or gas. People who are not nervous about their jobs or incomes are still cautious about their spending.

This is what makes me worry. Saving when you do not necessarily need to or saving more than you need to can make someone into a miser. Then someone who suddenly sees that they aren’t saving for a goal or for a good reason, could snap and then spend recklessly.

“It will likely be a difficult quarter for consumer spending because consumers are still very nervous about their jobs,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “They’re going to be very cautious in their spending until there’s concrete evidence the recovery has really taken hold.”

The recession is taking hold in other countries as well. Canada’s GDP has fallen by over 5%, retail sales in Hong Kong are down 4%, European governments are rethinking their employment schema in order to have more workers.

There is no easy solution to this problem, but no extreme will make our financial problem improve. Reckless spending created this problem, stockpiling and not spending will not end this problem. A happy medium of spending within reason needs to be reached. Reasonable spending differs for each person, yet spending nothing when you have money to spend is also foolish and deprives yourself of what you may truly need (or want).

What does luxury really mean? Are the luxury goods worth the high prices?

 According to the Luxury Institute’s survey of over 500+ high net worth consumers:  “Superior quality (82%), superior craftsmanship (78%) and superior customer service (60%) are the top three requirements of a luxury brand. Yet, more than one-third of consumers say luxury brands are worse today than in the recent past on delivering superior customer service and on failing to have salespeople who are experts in their products”

Quality and craftsmanship are important for lesser brands as well. Customer service is something that began to wane in recent years though it is on an upswing to regain brand or store loyalty. I went to buy something at an office supply store the other day, and was met at the door by a sales associate who had nothing to do. Not only did he help me find the product on the shelf but also asked about other items I needed. Customer service is moving to the forefront again because many people in retail want to keep their jobs and appear indispensable.

Buying a quality item which is well crafted could be purchased via the internet even with some of the luxury brands or from some of the luxury stores. There is just so much that can be done when making an online purchase.

Even wealthy consumers believe that the prices of luxury goods are too high – “64% of wealthy consumers believe luxury goods prices are too high relative to the value they deliver.”

Brands that may not be considered luxury brands but have exceptional customer service, high quality and well-crafted products are in demand, though all of these components would also signal to me, as a consumer as well as others that the items would be reparable, well made and long lasting.

Consumer confidence increased last month. On this news, the stock market has soared.

Stocks are fickle. So are people. Just by saying that consumer confidence has increased, then people will definitely feel better about some things. Some people. Those who have more difficult paying their bills regardless of the economic situation they will have not feel as confident about their situation because they are less likely to consume things. 

Saturday, I as in a grocery store and I overheard more than one person complaining about the price of food. No matter what, food items are definitely what people need to purchase. Making your own meals at home, especially if you are preparing food for more than one person is more economical but it is important. Increases in food prices do not make consumers confident.

Proclaiming it in the headlines doesn’t make it so. If you are working and have a relatively secure job, this doesn’t mean that you are free from financial woes. Nor does it mean that you are an optimistic person in general. The Consumer Confidence Index is a survey of 5,000 homes, polling a few people to represent a group. If you polled an overly pessimistic group or an overly optimistic group, the numbers might be skewed.

If you have any money – 401k, investment, mutual fund, etc.  - in the market now, the increase is good for you. Even though it may not change your day to day living as much.

…Nicholas Souleles of the University of Pennsylvania and David Gross of the consultancy Compass Lexecon calculated that the typical consumer unnecessarily spends $200 a year in interest payments by keeping a sizable stash of cash in savings or checking while at the same time carrying a credit-card balance. In our heads, the two don’t line up.

Time recently posted an article about the problem with credit cards – “The Real Problem with Credit Cards: The Cardholders.” This is true, spending is not the same for any two people. My credit card usage leans toward using my cards as cash. In my mind – paying interest is bad, earning interest is good.  I may not have the cash today but I will before the bill comes or I just don’t want to carry around a lot of cash. No problem. I can do a quick calculation and determine whether or not I have enough to buy what I want. For larger purchases, they are generally not spur of the moment purchases. Even so, making several purchases for $50-$100 can soon throw a budget out of whack – great interest rate or not.

The credit card problem debate is like the gun debate. Guns aren’t bad if you are using them correctly. Some people should never have guns and do not use them wisely. Even people who hunt for food with guns know that these instruments can do great damage. Credit cards are the same way – these are financial instruments that should be used wisely. Some people should have never ever, ever had a credit card in the first place.

Spending more? It is possible to spend more on some thing s and less on others if you have re-prioritized your spending. Maybe you spend more on public transportation and less on gas. You may spend more time with your family at home, but you might not order out, but cook instead. When you have extra money in your budget will you change your habits?

Consumers are still trimming their discretionary spending, because there is no stability in the economy. As the economy improves, people may decide that they want to loosen their purse strings and spend more money.

“Consumers are feeling more confident and their overall expectations for the health of the economy are beginning to improve,” said Shawn DuBravac, Consumer Electronics Association’s economist and director of research. “Americans continue to worry about their own job security but are feeling more confident that the economy will improve in the coming months.”

With a secure source of income, the purse strings could loosen. If you have money and think that you will continuously have a source of income, then you will definitely want to do some spending. Economists believe that an economic rebound requires some spending. Some spending is good, but I don’t think that our country needs to spend at the same levels that we once did. 

Edward Leamer, director of UCLA’s Anderson Forecast, wrote that Americans, who were spending like drunken sailors on everything from houses to jet skis as recently as 2007, reversed themselves when the economic news became dire late last year. Personal savings went from virtually nothing in 2007 and much of 2008 to about 5 percent in January. There’s nothing wrong with saving money, and it’s a good idea for Americans to “take some safety equipment along on our journey.”

Spending did get out of hand, and money was burning a hole in many pockets and pocketbooks. Unfortunately the burns that people suffered were because they spent too freely.

When I was a kid, I would look at the McDade’s and Service Merchandise catalogs daydreaming and making believe. Some things were not practical but were interesting to imagine owning. I had an allowance, but also saw the people around me thinking about purchases and saving up for large wants, while never neglecting the needs in our family. I made some dumb choices sometimes, but that was a part of growing up. Our nation is going through a maturation period. Instead of spending recklessly, there is a pullback, at least for those who are the most affected by this economic downturn – almost everyone.