Consumers watching spending carefully

SALTILLO – Matthew and Cindy Hale’s budget allows for visits to their favorite restaurants and an occasional splurge at their favorite stores.
But if the money isn’t there, the Hales don’t whip out the plastic and charge it. If it’s not in the budget, too bad.
“It’s simple – you can’t spend what you don’t have,” Matthew said.
The Hales buy what they need and, if the budget allows, what they want.
In today’s tough economic times, the Hales may be more the rule than the exception.
According to Consumer Reports, 71 percent of Americans said they have bought only what they absolutely needed since the economic crisis started last year.
The recent CR poll also showed that 61 percent of Americans went out to dinner less often, 53 percent put less on credit cards, 42 percent spent less on groceries and 58 percent cut back on vacation expenses.
When it comes to budgeting your money, experts say the key is determining the difference between needs and wants.
The “needs” are simple – they are the necessities to survive. “Wants” are what people would like to have.
Food, clothing and shelter are needs. Lobster, designer jeans and a beach house are wants.
And sorry, but a Blackberry, iPod and a 50-inch plasma TV don’t qualify as needs either.
The National Endowment for Financial Education says knowing the difference between wants and needs is an important part of learning to manage money.
“It’s easy to spend money. What’s not so easy is spending money wisely,” says the organization’s smartaboutmoney.org Web site.
And according to the NEFEs Paul Golden, having a budget is critically important, recession or not.
“It doesn’t matter what the economic conditions are, you should always have a budget,” he said.
The national savings rate has risen, a positive sign, Golden said. Some financial experts think that the recession may have changed the spending habits of Americans forever.
Golden isn’t so sure, but has seen some positive consequences of the longest and deepest recession since World War II.
“The recession has hit us hard and it’s forced a lot of people to do something and change the mind-set that ‘this can’t happen to me,’” he said. “More people realize that maybe they should have a plan.”

Ready for the recession
For the Hales, budgeting was a part of the couple’s lives even before the recession set in.
“It all started a few years ago when we both got full-time jobs,” Matthew said.
Early in their 61⁄2 year marriage, Matthew was working and Cindy was in school. When Cindy got a job, Matthew went to school. Both completed their education and got full-time jobs.
They set up a separate checking account solely to pay bills. After the first few months, they actually had money left over to pay down debt and put more money into savings. The Hales decided it was the way to go.
And then they discovered Dave Ramsey, the financial advice author, radio and television personality who’s dispensed his view of money management via programs such as “Financial Peace University” and “Total Money Makeover.”
Ramsey’s approach is simple: Pay off debt, use only cash and save, save, save.
And he eschews using credit cards, insisting that they’re more trouble than they’re worth by keeping people in debt.
According to Consumer Reports, Americans have more than $917 billion in revolving credit, with most it the charges put on credit cards.
“We want to pay off everything, including the house, but that’ll take a while,” Cindy said. “But we do what Dave Ramsey says, and that’s to live on less than you make.”
As for the recession, the Hales say their financial planning has helped them weather it just fine.
“There’s really not been much of a change because we were already budgeting,” Matthew said. “We don’t eat out as much and we don’t spend as much when we go out, but we really haven’t changed what we’ve been doing.”
And with the holidays approaching – a time that usually put a strain on many families’ budgets – the Hales say they’re prepared for that too.
“We have Christmas Club accounts,” Cindy said. “They’ll cover just about everything except what we buy for each other.”
It’s that kind of planning that will help people’s finances in shape, said the NEFE’s Golden.
Taking small steps to achieve financial stability is key, he added.
“Ideally, you’d like to have three to six months worth of expenses set aside, but that’s awfully hard, especially in today’s economy,” he said. “But there are studies that suggest even having as little as $500 set aside has a big psychological impact. So, it’s OK to start small and build on that. Just have a plan.”

Dennis Seid/NEMS Daily Journal