What is up with the Economy - Header Image

Everyday you can find an article highlighting facts that support the economy is poised to skyrocket, tank or anything in-between, so what does it mean? What should you do with your money? Probably not what you expect. Here are a few stats about the U.S. economy:

  • Conventional mortgage rates hit a recent low of 4.06% this week.
  • American’s aggregate household debt is at $13.5 trillion
  • That is $869 billion (6.9%) higher than the high in 2008
  • Student debt is $1.46 trillion
  • Credit card balances total $870 billion
  • Auto loan debt/leases are at $584 billion
  • The stock market is rising this week
  • The Federal Reserve is not expected to increase interest rates this year

A few things to tell you where I am coming from. My Dad and Mom raised me and my siblings using the envelope method, or more commonly known today as the Dave Ramsey method. Simplistically it is just living on a budget. In more detail, when you get money, you separate it for expenses you have and you know are coming. For example, if you have a car you know every week you have gas, every month you have insurance, every few months you need an oil change, every year or so that more expensive full engine checkup, every couple years new tires and periodically some repair of some sort that always costs more than you expect or hope. The idea is that you put money aside beforehand for those expenses so you can pay for them upfront. Rather than surprises, you get what you planned for actually happening.

The second is that I believe that the stock market as working in direct opposition to the financial health of the American household. Don’t get crazy on me yet as I do have a retirement account and think of the stock market as a viable investment strategy. I say this largely because the stock market is based on profit factors that economists project companies to earn. It isn’t any surprise that profit needs more sales and more profit needs lower costs. More sales come from you spending more money so your debt today is helping their stock price. And the pressure for lower costs are looming in every personnel decision made including your salary, so paying you less helps increase their stock price.

Back to the economy, so what does all of this news, stats and information mean and what do you do with it? Unless your job is a financial planner or a day trader forget about it. Focus on your household economy and not the US economy. Focus on paying off those credit card balances and don’t worry that your favorite store’s stock might drop because of it. Chances are when you retire that store may not be around anyways…RIP Sears. Do you love that new restaurant, start budgeting for it, if it is really that good it will still be around when you can afford it. And so you don’t think I am completely myopic, by making your household economy stronger, you are actually making the US economy stronger too.

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