To Spend or Not to Spend, That is the Question

Out walking my dog this morning I ran into a former colleague from my investment banking days who was also out with her dog.  As our two pets tussled joyfully, blissfully ignorant of the dreadful state of the economy, we reminisced about our old banking days and the sad state of our former firm, one of the acquisitions that had been subsumed into the now teetering behemoth Citigroup.   Quietly she confessed that that she was close to completing a major renovation of her apartment.  Though her financial position is stable, her husband gainfully employed and their collective expenses under control she had considered cutting back on her apartment work, not because of any financial pressures on her family but because of the general economic mood.  She  didn’t want to be seen as insensitive, spending money while others were facing hard times.  Her embarassment at undertaking an apartment overhaul at this time made me think about expectations and attitudes in the face of our challenging economic times.  Without a doubt virtually all of us are substantially poorer, or should I say less weathy, than we used to be.  That said, do we all really need to cut back dramatically?  How will we get out of this mess if all of us, even those who haven’t lost their jobs or savings, stop shopping, going to the theatre, eating out, and going on vacation. I am not suggesting that we should all be throwing money away, but maybe now is a good time to take a realistic assessment of our financial positions.  If your expenditures were pretty reasonable to begin with and your job or income remains relatively stable, doesn’t cutting back now make things worse overall? 

Over the past few years I’ve gotten pretty lax about monitoring my spending.  With my income and savings impacted by the current environment I decided it was as good a time as ever to examine my cashflow. Essentially, I wanted to know precisely how much I spent last years so that I could compare it against what I expected to earn this year.  In mid-January I stopped thinking about this and began my examination.  Since I remain a Luddite when it comes to bill paying, my personal analysis involved pulling out my check book and calculator totalling all of my checks, netting out any offsetting deposits such as insurance reimbursements.  A tedious activity to say the least but still it didn’t take long to figure out how much I spent last year. The good news was that I hadn’t gone all that overboard.  After I netted out a few things that fell into the extraordinary category I felt even more comfortable.  Nevertheless, since a number of my 2009 expense items are on the upswing I wasn’t out of the woods yet.  Like most people my health insurance rates have jumped dramatically, followed closely by my apartment maintenance, a victim of the significant increase in New York City real estate taxes.  My garage costs, another uniquely New York City phenomenon, were also moving up for the first time in 20 years.  To help offset some of my expense increases I also took a look for places to shave a few outgoing dollars.  To this end, I cutback on my landline phone service and reduced the number of my premium cable channels.  Neither of these provide dramatic savings but still I’d rather spend that money on other things.  Net, net I’ve concluded that though I am not as well off as I used to be I can still maintain my standard of living without a draconian cut in my expenses.  Still like most people these days I’ve got to improve my own personal attitude because I have to admit though I am probably okay financially I am still stunned by the stock market’s swoon and the demise of the financial sector.  Last week I took my first step.  After avoiding all shopping during January and most of February,  in an effort to help the economy, I did buy a pair of not necessarily essential boots (on sale of course). Consider it my contribution to the economic stimulus!         

To find out about Arin, click here to read her bio.

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