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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