Friday, October 31, 2008

CNBC.com says US has cut spending for the first time in 2 years

Personally I think that is great news. The reasoning as to why the US has cut spending is not good news by any means (stock market, job loss, financial uncertainty, etc...) but the fact people have decided to cut spending can hopefully help them curve their long term spending habits. As a while the US spends more than we make, so we are never actually getting ahead at all, we(individually) are constantly falling behind.
We should always pay ourselves first before we even consider spending money. A good idea may be to automatically have 10% of your paycheck go into a savings account you rarely if ever look at, that way you are putting some money away for a rainy day.
This time of economic uncertainty can bring it to peoples attentions that that paycheck that gets deposited every week may sometime disappear, and you will have to find a way to pay bills and survive without for a period of time. I do not want anyone to lose their jobs, I just want the idea to be in their head that's its possible, that way we will as a whole stop spending like crazy and we can turn the savings rate from a negative to a positive.
Nobody will be there to bail you out as individuals when you lose your job, or you get a pay cut, or as an entrepreneur your customers cut their spending, therefore resulting in less profit each week. Living below our means, though boring and not fun is proven as the best way to get to personal financial solvency.

As soon as you cut your spending and put that extra cash into a savings account, you not only are saving that dollar value, but that money you saved is now working for you and gaining interest, so your then making extra money for yourself, passive income, making money for doing nothing.

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