My Excite News today said that our lovely president wants to give everybody tax rebates. The hope is that we'll take the $800-$1600 that they want to give us and go hit the mall.
As much as I'd really like to have a wii and some new clothes, that's the last thing I'm going to be doing with my money right now.
My husband lost his job 3 times last year. Not because he was goofing off or anything, but he just happened to get hired into jobs that didn't have their contracts removed or had to make cutbacks. With all indications of America's economic bubble bursting at some point, we don't expect things to get better soon. If we get the money, we're saving it. Maybe we'll invest it in gold or some other precious metal.
A couple of days ago, my husband suggested to me something that I never would have imagined that he'd say "let's live like misers." He loves to spend. However, he wants to be prepared in case he loses his job. So our goal is to save up $5000 in case he loses his job again.
It seems as if America has lost all touch with common sense. If you get into debt or spend money that you don't have, eventually you're going to have to pay it back. Visiting my family over Christmas really showed me the effect of being smart with money, and living within one's means, or being stupid. The people that got into debt when I was younger sure had fun then, but they're not exactly that well off any more.
Dave Ramsey is a pretty smart guy when it comes to money. He has a lot of common sense. He has a few baby steps that he suggests that people use when they are trying to work their way to financial independence:
Step 1: save up a baby emergency fund
He suggests that you save up $1000 as a baby emergency fund, in case the car breaks down, the refrigerator stops working, or something unexpected like that comes up. $1000 isn't going to help a whole lot, however, if you lose your job. We're trying to save up $5000 right now... actually we're trying to save up $6000, $5000 in case of a job loss, $1000 in case the car breaks down.
Step 2: pay off all debts except the house
We have a student loan and a car loan that we need to pay off. Oh, and some medical bills when we had to go to the ER last summer (3 times) when dh didn't have a job. So that's what we have to pay off after we save up our emergency/job loss fund. You pay interest on all of your debts, so it's a good idea to get them paid off. Once you have no debt, you have more free money every month. Yay!
Step 4: save up 3-6 months of expenses
This is where Dave suggests that you save up in case of a job loss. We're doing more of step 4 in step 1, primarily because the threat of a job loss seems a little more looming than even the refrigerator breaking down. But we'll probably add to our savings here.
I think that step 5 is pay off the house, but it could be save up for retirement or save for your kid's college funds. If I ever get to these steps I'd be all over it ;).
I don't see anywhere in here the instruction to "go out and waste money at the mall." That might postpone the inevitable downturn in the economy, but it's going to happen. You can borrow and live beyond your means forever, even if you are a government. We can try to put our head in the sand and pretend that when our economy grows enough, we will pay off the national debt, but that's just like somebody who goes out and charges up their credit cards saying to themselves "I'll pay it off when I get a raise." When that raise comes, they just want to spend more money on other things.
If we get these tax rebates, I'm saving mine. I'm going to need it whenever the bubble finally bursts. And if everybody else rushing off to the mall or going on vacation ends up prolonging the inevitable, then I guess that gives me a little bit longer to prepare.