Spend a little, save a lot: Here’s some advice for your finances during uncertain times
Consumer confidence in Utah had been strong for many months, despite continued high inflation and the omicron wave of the pandemic. But according to the most recent report from the Kem C. Gardner Policy Institute, Utah’s consumer confidence fell sharply in March.
So, what does that mean?
“Consumer confidence is a lagging economic indicator, as opposed to a leading indicator, meaning it follows or it confirms economic trends,” said Amanda Christenson, financial counselor and editor of the site Utah Money Moms. “So it's not surprising, and maybe expected, having just experienced that interest rate hike. And, you know, inflation being universal and no one is immune to that — to groceries or gas or any of it.”
Here's more of what she had to say about this economic moment:
This interview has been edited for length and clarity.
Caroline Ballard: Inflation is high. Gas prices are high. Home prices are high. Can it stay like this forever?
AC: No, it can't stay like this forever, and it won't stay like this forever. As a financial educator and an accredited financial counselor, I think it's also really good to mention what consumer confidence is and what it is not when we talk about this issue. It does mean that expectations for growth and financial opportunity have softened or have cooled a bit. It does not mean, though, that our confidence to manage our limited resources has to decline or that somehow sound financial principles go out the window to be neglected as if they won't make a difference. They make all the difference.
CB: Global geopolitical conflicts can be unsettling. How do you see something as big as the Russian invasion of Ukraine affecting how Utahns spend or save their money?
AC: On the day-to-day level of spending decision making, it shouldn't lead to panic buying — panic buying defined as the unplanned purchasing of large quantities of a particular product or commodity due to sudden fears.
CB: Like toilet paper.
AC: Right. We've seen that before. That's what it shouldn't lead to. Also this herd mentality: "Everyone is doing it. I must be needing to do it also. I'm going to be worse off if I don't." Those decisions are driven by anxiety and fear.
What should be happening right now is planning — a little more effort given to an intentional plan for spending. I'm thinking inventorying items in my fridge, freezer, pantry, cold storage, medicine, cabinet, cleaning closet — listing what needs to be replenished now and in the near future and sticking to that list at the store.
These are the kinds of day-to-day planning with our money that we've maybe during the pandemic let go of because we couldn't do things with our money that we really wanted to do. We are now back in a mode of needing to be more intentional with planning when it comes to spending. And contribute to an emergency savings account. One thing to do today would be that.
CB: This is also tax season, and some people will be getting a tax return in just a few weeks. What recommendations do you have as an expert for spending or saving that extra money?
AC: A recommendation right now, particularly when the economy is a little unpredictable, would be to save a large chunk of what you're getting — at least half — giving you options down the road.
What I would do with the other chunk is two more things. One, I would allocate 40% to high-interest debt, particularly right now credit card debt that fluctuates as that prime interest rate rises. The feds have confirmed that's going to happen a few more times this year, maybe even more often.
And the 10% that's left, I recommend you give yourself permission to spend on something fun as long as you're also doing those things that are going to protect your financial future. So the saving and the paying down debt and giving yourself some permission to spend along the way. Otherwise, it's kind of hard to stick to those money-smart things. It's kind of hard to do if we're not also allowing ourselves some room to spend.