Save or Spend: Financial Experts Offer Very Different Opinions

Economic conditions being what they are I was a little surprised to see the Wall Street Journal's article "Leverage, Baby!" advocating, more not less debt. One day later the U.S. News and World report warns us to "How to Plan for a Double-Dip Recession," and it advocates paying off debts as quickly as possible. So, which one is it financial experts that we look to, do we take on more debt (supposedly to avoid a recession) or do we prepare for the worst, yet another recession when we are still experiencing the first?

There truly are two sides to the same coin during our current economic conditions. The actions encouraged by the Wall Street Journal can be confusing to many of us. But at closer looks it all boils down to really, "Who is holding the coin?" Their article is for "sophisticated, disciplined investors who have lived and invested within their means." This article goes on to report, "Most important, there's nothing inherently wrong with leverage, or borrowed money, says Christopher Jones, a New York financial planner working with high-net-worth clients. For people with the capacity to take on debt, who understand it and can tolerate the risk, now is an ideal time to leverage cheap dollars to buy into areas that can produce much higher returns over the longer term," he says."

It is a "tough concept to embrace." But with mortgages at 4.9% now may be the time to make a purchase or refinance that you may not have in other circumstances considered. We did, and it saved quite a bit of money each month. Money, we can now use to plan for the double dip recession.

That's the good news. The bad news is that unfortunately it looks like the US & World Report is correct. Moody's Economy.com, says there's just a 23 percent chance that the U.S. economy will be in a recession six months from now. Another recession is about to hit us all again, hard and most of us haven't recovered from the loss of income, jobs, and homes that the first one caused.

I guess it's time to tighten the purse strings even tighter and make sure that I am the one still holding the coin at the end. But how? The planning article provides some good suggestions but how do they translate to real life?

Save more. How can we save more if we are making less? One suggestion, use coupons at the grocery store or if you go out to eat. Look at the total bill and then place the money you "saved" using coupons into your savings account.

Make backup plans. My motto, hope for the best prepare for the worst. Consider what would happen if things go any worse. Is there something that you can do to either prevent it or to prepare for it, like not getting that new car, house, credit card or dining room furniture?

Stay liquid. This is simple keep your money where you can get it. I don't mean under your mattress but make sure that you don't have too many things tied up in stocks, bonds, investments, or mutual funds where it could either take too long to get when needed or could be lost due to a recession.

Get smarter. Maybe now is the time to get that certification or degree that you never finished. When it comes time to hire people again, there will be competition and your ability to stand out in the crowd may be just the thing to get you that job you always dreamed of.

Start something on the side. Who knows what you could do to bring in some extra money? Need ideas? EBay, consulting, tutoring, babysitting, create our own jewelry, work for Avon, or Mary Kay, or start your own business (small scale of course). Who knows it may not be "on the side" too long if you are successful. It can also help with savings and paying off debt.

Wait. Interest rates may look good now, but that doesn't matter if 6 months from now you don't have the money to pay the principal and interest. Maybe later is a good time to purchase that new car or home.

Most importantly read the fine print. Should you decide to take advantage of the recommendations by the WSJ and make changes in your debts be sure you read the fine print clearly. Our first go round with our refinance closing documents showed some serious inconsistencies that were not explained during the application or inquiry process.
Will any one of these things make a difference? Probably, but utilizing all of them definitely can.