In the currently challenging financial climate, many people are finding they have less disposable income to spend, while others are preemptively reining in their purchases to build up savings in case of future economic calamity.
As consumers spend less, stores of all types are taking a hit. On Wednesday, the Commerce Department released statistics showing that retail sales fell by 1.2 percent in September – double the amount that economists had predicted.
It is also the third month in a row that retail spending has slipped, a trend which has not been seen since in more than 15 years.
This is undoubtedly bad news for the retail sector and for the country’s financial recovery. It is estimated that nearly 70 percent of the economy is supported by consumer spending.
However, those of you who are taking more care over spending should not take this as a sign to break out the credit cards and party like it was 1999.
After all, it is consumers’ credit – not their cash – that has been lining the cash registers and profit margins of retailers for the past several years.
With this in mind, it makes sense to use any extra money you have to chip away at existing debts and work toward getting your finances in order, instead of spending it.
Sara Johnson, a managing director at economic forecasting group Global Insight, told the Christian Science Monitor that if Americans do succeed in reducing the amount of money they owe on loans, mortgages and credit card debt, it will be a marked change from the trend of the past several years.
“The last time liabilities increased more slowly than income was 1992,” she told the news source. That means that we’ve all gotten used to a lifestyle in which it is acceptable to owe more money than we earn.
An article in the Wall Street Journal’s Smart Money section suggests that one way to make paying off credit card debt less painful is by trying to negotiate a lower rate with your card provider.
And if you are looking for a new deal, credit unions may be more likely to offer favorable interest rates than bigger-name lenders, it adds.
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