Suze Orman Gets It Right About Why Our Economy is Faultering

Sometimes, I don’t agree with the advice that Suze Orman gives, but she definitely gets it right in this article about what to do with the mini windfall that you’ll be receiving from the government this summer.

Here is a quote from her article that I liked:

I don’t agree with that approach on any level. The economy isn’t floundering because we aren’t spending enough; it’s floundering because we’re spending too much, largely on credit. So do the opposite of what the government is hoping for — it’s far more important for people to boost their savings, not their spending.

Dead on, she gets it right. We’re having problems, because of the OVERSPENDING, not the UNDERSPENDING. You can use the housing, mortage crisis, whatever you want to call it, as a great example. The reason the subprime market fell to its knees and the housing market came to a screeching hault is because of average Americans like you and me spending WAY too much on a house we could not afford. Whether this was the mortgage lenders fault or the borrower’s fault, it doesn’t matter. The problem was overspending.

Another example is that we have 975 billion dollars in consumer credit card debt. It’s 2.5 trillion if you factor in student loans and home equity loans, but let’s just focus on the credit card part, because I understand why people take out student loans. I know there are some of you out there that use credit cards just to get the points and for the convenience of floating money for 25 days, but with 975 billion dollars in credit card debt, there is obviously the majority that are buying crap they can’t afford.

The equation goes like this: Buying something on a credit card + not having that amount of disposable cash stored somewhere else to pay it off immediately = YOU CAN’T AFFORD IT.

It’s simple. Use the rebate check to pay off debt or save for the short/long-term. You won’t stimulate the economy in the short-term, but you will in the long-term by helping out your financial situation. Don’t listen to the government. They don’t know your individual situation.