The retail sales from the Commerce Department on Thursday revealed a decline of .8% in January, which followed a .9% drop in December. A great deal of the decline in retail sales is attributable to a 9.3% decline in sales at gas stations. As can be expected, the rest of the retail industry, and the economy watchers, are looking to see the gas money go to other retail spending to boost GNP– with the goal being that retail spending continues to increase without regard to lower gas costs. Such a result would be good for the economy because consumer spending drives 65% of the economy and as spending increases, jobs and growth occur.
But what about the average Joe and Jane – you and me? Our job is not to build the economy, our job is to build personal wealth and reduce debt so we have funds to retire with. To me, the really good news in this week’s report is that the personal savings rate jumped in December from 4.3% to 4.9%. Is it possible that, following the misery of 5 years of stagnant growth and a horrific financial crisis and recession, Americans are getting the message that you need cash in the bank as a savings cushion?
I hope that is the case. After all – we should never forget – that when the economy falters, having available credit, rather than cash, does not work. Why is that? The answer, as was demonstrated in 2009-2011, is that the credit companies will slash your available credit down to $100 greater than you owe. Worse yet, they will send you the ultimate insult letter telling you how much they appreciate your business. Lesson learned – when you need to borrow money, it’s not there. When you don’t need to borrow it – that’s when you’re most eligible for a loan.
I always say if you want to avoid financial cancer, get rid of the credit card debt. Best yet – put those payments into savings. To find out how, sign up for our upcoming seminar on February 24. Simply click on the image below to register.
Be sure to listen in on Saturdays from 8:30 to 10 AM on WDFN 1130 AM – on iHeart by CLICKING HERE– and watch the show on TV 20 on Sundays at 11 AM. Law and Reality is not just information – it’s entertainment!
Have a great week,