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BUY NOW, SAVE LATER
Buy Now, Save Later
BLOGGER: BEN PIERSON
Seriously, if you have savings and good job security (even if we hit 11% unemployment that means we’re still at 89% employment after all), go out and spend. I don’t consider this a civic duty or patriotic act – I consider this a selfish one. America is on sale.
Barring us slipping into a depression – not very likely considering the scope of worldwide government intervention – this is the best all around sale event we’ll see for at least the next decade. By that point if you follow the plan, you’ll have saved again and be ready to again take advantage of the next cycle of sales.
In economics there is a term called consumption smoothing. Essentially what this means is that if we knew exactly how much money we would make during our entire life, we would be happiest spending the same amount every year. We would find a lifestyle that fits and then ride happily (happiest) into our sunsets. For the first time in my life (I’m 30), I now see the greater wisdom behind this.
Economic cycles have gone on for thousands of years. There will always be a next “up” and there will always be another “down”. End of story. The angel (and angle) lies in the details. During those “up” periods, everyone has money and is buying. Supply and demand says: if more people are trying to purchase a finite set of goods, the price of these goods will go up. So during the up cycles, goods generally cost more. Houses cost more, vacations cost more, and cars cost more. In a down cycle, houses become cheaper, vacations become cheaper, and cars are cheaper…. And so if you have money during these times, go out and spend! It’s all on sale!!
I know someone who just took his family of four on vacation to Jamaica. 7 days at an all-inclusive resort, including airfare: $2,200. Yup, only $2,200 total for all 4 people. I’m not saying $2,200 isn’t a lot of money to most of us, but the point is this vacation would have cost him over $5,000 anytime during 2004-2006. I’m sorry if you paid $500,000 for a condo in Palm Beach over the last three years, because you can now buy that same condo for $300,000 or less. One friend who works in Manhattan lived about a 45 minute train ride away in order to avoid Manhattan rents. Well guess what? Several buildings downtown now offer two months rent free and the rental prices themselves have gone down. Thanks to his having saved up over the last two years he is now living in Manhattan at 30% off what he would have paid two years ago.
I’ll be the first to admit that I’ve done a very poor job of this myself. Like many of you, perhaps, during the good times of the last several years I spent more and saved even less… the exact opposite of what I should have been doing. In the midst of an economic boom of course it’s tough to think prudently and save up for a rainy or opportunistic day. It’s tough not to take the $5,000 vacation when that’s what your neighbor is doing. Well, Love thy Neighbor but don’t act like them. When times turn good again, save save save! Practice prudence and practice patience. The boom times may go on for years, but they WILL end once again. You may get jealous of your neighbor’s tan once or twice, but you’ll last laugh when you pay half as much for the trip he just took.
Arin Goldman wrote a great post earlier (http://blog.imagineage.com/?s=spend) on this question of spending. Not to ruin the ending but she bought a pair of boots on sale and, slightly tongue in cheek, considers it her contribution to economic stimulus. Certainly every extra bit of stimulus helps right now, but that’s not what I’m telling you to do. I’m saying be selfish. That shirt won’t be 70% off forever. That car might not be this cheap again for years. Do be prudent and don’t spend money you don’t have. But if you have it, now’s the time – America’s on sale.
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Tags: boomers, buy, downturn, economic, economy, finance, imagineage, midlife, money, purchase, save, shopping, spend
I understand what you’re saying, Ben about going out and spending right now as everything is on sale. You can’t deny this makes sense. But where I have trouble understanding is where people who lost a lot of their nest egg are going to get the money even to buy sale items? Or rather, how they can justify buying items solely because they ARE on sale. Take your example of the condo in Palm Beach on sale for 300K. I’m not the authority on real estate in Palm Beach, but this does sound like, as you say, a ‘good deal.’ However, it still seems like a somewhat frivolous and financially irresponsible move financially for someone to make a purchase like this when the economy is unstable and job security is a big issue. There undoubtedly be another “up” in the economy, but the question, I feel, is more about when. As there is no clear answer to this question, I think it’s hard for people to Buy Now. As you said in a previous blog, this situation is not unprecedented. Things could get a lot worse before they get better and until we start to see the economy turn, I think that most bargains are going to go unnoticed. What do you think?
P.S. Like the picture
Hi Mer, Thanks for the comment and I’m glad you like the photo – it was a very tasty eclair!
Certainly for many people job security IS an issue. Those people should not be the ones purchasing the $300,000 condo or even, depending on their level of savings, the $50 sweater on sale from $200. But given we’re probably looking at a peak of around 11% unemployment (though the gov’t statistics are a bit misleading and this is actually a bunch higher), a majority of people are still gainfully employed. These are the people I believe should fight their fears and ‘buy now, save again later’. Now whether anyone ever ‘needs’ the $50 sweater or condo in Palm Beach – or this is a need created by marketing and our peers – is a whole different issue and perhaps one our resident Drs could tackle at some point. However if you are going to own the sweater and own the condo at some point, think about the long term and take advantage of this short term trough.
This story is not getting enough coverage in the press. I am going to contact my state senator & rep & ask them to send out press releases.