Stories about the latest health studies always confuse me because they seem to conflict with all the previous reports.
Take wine, for example.
Drinking it used to be bad for you. Then it was only bad if you drank too much and too often. Then white wine wasn’t all that good for you, but red was because it provided the cancer-fighting stuff — antioxidants.
It was so confusing. But like everything else, I figure moderation is the key. I occasionally have a small glass of red wine.
We’re getting the same kind of confusing information about money these days.
An Associated Press story last week suggested that saving is actually becoming a bad thing, not for individuals, but for the general economy. The writer noted that these days economists are referring to something they call the paradox of thrift. The paradox is that what’s good for thrifty people can be terrible for the economy if everyone does it.
The story cited government studies showing that people are saving about 3 percent of their after-tax income these days, triple the amount of a year ago. The savings, of course, come at the expense of consumer spending. And less spending means fewer jobs.
Saving may be bad for the economy in the short term, but let’s not forget how we got into this economic mess to begin with. Hordes of people were spending money they didn’t have, hoping the snowballing value of their homes would make everything OK in the end.
The U.S. economy had become a giant Ponzi scheme fueled by easy home loans, easy refinancing and ballooning home values.
The balloon has popped.
And now you’re hearing about what a paradox it is that people are trying to save money.
There have also been stories on the opposite side of the issue, about how spending is no longer trendy and that even some people with plenty of money are afraid to be seen doing it. One story used the example about a wealthy woman in California who had a pricey purchase for herself wrapped up so that her family would think it was a gift for or from someone else.
In the long run, our economy will be better off if the people without money develop some better saving and spending habits and the people who’ve still got it don’t suddenly pretend they’re in the poor house.
If money is tight or you’re worried about your job, now is the time to save what you can. Advisers have long suggested that people should have six months of expenses tucked away in a safe place so they can deal with an emergency.
If you have good reason to believe your job is in jeopardy, you might want to save more now.
How do you do that?
You don’t spend money you don’t have and you don’t buy things you don’t need. Big screen TVs are cool, but the truth is you don’t have to have a TV at all if you don’t have any money to save.
People like to look for quick fixes for problems, but money issues are best solved over time. Can’t save anything? Take a few bucks out of every paycheck and put it in the bank before you do anything else. As your money grows, your savings success starts to make you feel good and you can find ways to save even more.
If you get your nest egg put away or have already done so, by all means, start spending a little as long as you have established a budget and you know you’re living within your means.
And don’t be afraid to bargain a little to make your money go further. Many businesses will give you a deal these days if you ask for one. They’d rather make a smaller profit than not do any business at all.
What I’ve said today isn’t anything you haven’t heard before. Start a budget. Live within your means. Save some money for an emergency or for the future. When you do buy something, do your homework and ask for a good deal.
There’s no paradox here, just a little common sense. The paradox that we really want to avoid is the one of greed where we all spend money we don’t have and it forces us into bankruptcy and onto the unemployment line. That wouldn’t help us or the economy.
In both wine and money, moderation may be the right course.
Mike Benbow: 425-339-3459; benbow@heraldnet.com.
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