Should we spend or save?
In the current economic uncertainty, many have suggested that it is the time to be saving instead of spending. And I am not even talking about spending on luxury items, just the normal average stuff people buy – groceries, clothes, toys, cars, books etc.
In the good times, people often say “I am doing my bit to spin the economy” – meaning they are going shopping thus helping the economy. However, during times when things are uncertain, people will tend to do the opposite – they stop/ slash spending, or they choose to spend on things which they really, really need only.
I have 2 minds on this. On one hand, it is actually good to be prudent and forgo what can be forgone. But then, why do we need an economic situation to get us thinking like this? On the other hand, do we really need to be so extreme that our levels of spend are slashed significantly?
Consumer spend has long been one of the major components of a country’s aggregate demand and it is also a measure which is used to see the strength of the economy and its underlying sentiments. So, if we cut our spend, this sends the message that the economy is in trouble and that in turn will hamper the entire system’s demand thus affecting supply. When supply is affected, jobs are affected, prices are affected, companies’ P&Ls are affected, impacting income stream, jobs, etc.
So where does that leave us? To spend or not to spend? I have personally held off spending on big ticket items like furniture, electrical items etc., but have continued with the everyday purchases quite like before. Although I am aware that tomorrow’s market may change dramatically, I am thinking that what needs to be done, needs to be done. In spite of all this, I also think that saving and investing needs to also carry on. And this needs to be build as part of our “spend”.
After all, if we do not continue spending, how is the economy going to recover? And how will that help us?
